vehicles as part of the union's integrated approach …...en en european commission brussels,...
TRANSCRIPT
EN EN
EUROPEAN COMMISSION
Brussels, 8.11.2017
SWD(2017) 650 final
PART 1/2
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT
Accompanying the document
Proposal for a Regulation of the European Parliament and of the Council setting
emission performance standards for new passenger cars and for new light commercial
vehicles as part of the Union's integrated approach to reduce CO2 emissions from light-
duty vehicles and amending Regulation (EC) No 715/2007 (recast)
{COM(2017) 676 final} - {SWD(2017) 651 final}
2
Table of Contents
GLOSSARY - ACRONYMS AND DEFINITIONS ....................................................... 9
1 INTRODUCTION ..................................................................................................... 10
1.1 Policy context .................................................................................................. 10
1.2 Legal context ................................................................................................... 14
1.3 Evaluation of the implementation ................................................................... 15
2 WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? ............................... 17
2.1 What is the nature of the problem? What is the size of the problem? ............. 17
2.1.1 Problem 1: Insufficient uptake of the most efficient vehicles,
including low and zero emission vehicles, to meet Paris
Agreement commitments and to improve air quality, notably
in urban areas ..................................................................................... 19
2.1.2 Problem 2: Consumers miss out on possible fuel savings ................. 20
2.1.3 Problem 3: Risk of losing the EU's competitive advantage due
to insufficient innovation in low- emission automotive
technologies over the long term ........................................................ 21
2.2 What are the main drivers? .............................................................................. 23
2.2.1 Driver 1: Consumers value upfront costs over lifetime costs ............ 23
2.2.2 Driver 2: Consumers' concerns regarding zero emission
vehicles (ZEV) ................................................................................... 25
2.2.3 Driver 3: EU standards do not provide enough incentive for
further efficiency improvements and for the deployment of
low and zero emission vehicles for the period beyond 2021,
leading to uncertainty over future policy ........................................... 26
2.2.4 Driver 4: Effectiveness of standards is reduced by growing
'emissions gap' ................................................................................... 27
2.2.5 Driver 5: Road transport activity is increasing .................................. 27
2.3 Who is affected and how? ............................................................................... 28
3 WHY SHOULD THE EU ACT? .............................................................................. 28
3.1 The EU's right to act ........................................................................................ 28
3.2 What would happen without EU action? ......................................................... 29
3.3 Analysis of subsidiarity and added value of EU action ................................... 29
4 OBJECTIVES ........................................................................................................... 31
5 WHAT ARE THE VARIOUS OPTIONS TO ACHIEVE THE
OBJECTIVES? .......................................................................................................... 32
5.1 Emission targets (level, timing and metric) ..................................................... 33
5.1.1 CO2 emission target level (TL) .......................................................... 34
5.1.1.1 CO2 target level for passenger cars (TLC) ........................ 34
5.1.1.2 CO2 target level for vans (TLV) ........................................ 35
5.1.2 Timing of the CO2 targets (TT) ......................................................... 36
3
5.1.3 Metric for expressing the targets ....................................................... 37
5.2 Distribution of effort (DOE) ............................................................................ 38
5.3 ZEV/ LEV incentives ...................................................................................... 41
5.3.1 Context .............................................................................................. 41
5.3.2 Policy options .................................................................................... 47
5.3.2.1 LEV definition (LEVD) .................................................... 47
5.3.2.2 Type and level of incentive (LEVT) ................................. 48
5.4 Elements for cost-effective implementation .................................................... 50
5.4.1 Eco-innovations (ECO) ..................................................................... 50
5.4.2 Pooling (POOL) ................................................................................. 54
5.4.3 Trading (TRADE) ............................................................................. 54
5.4.4 Banking and borrowing (BB) ............................................................ 55
5.4.5 Exemptions and derogations .............................................................. 56
5.4.5.1 'De minimis' exemptions' and 'small volume'
derogations ........................................................................ 57
5.4.5.2 Niche derogations for car manufacturers (NIC) ................ 58
5.5 Governance ...................................................................................................... 59
5.5.1 Real-world emissions (RWG) ........................................................... 60
5.5.2 Market surveillance (conformity of production, in service
conformity) (MSU) ............................................................................ 63
6 WHAT ARE THE ECONOMIC/EMPLOYMENT, ENVIRONMENTAL
AND SOCIAL IMPACTS OF THE DIFFERENT POLICY OPTIONS AND
WHO WILL BE AFFECTED? ................................................................................. 66
6.1 General methodological considerations .......................................................... 66
6.2 Consistency with previous analytical work ..................................................... 68
6.3 Emission targets: metric, level and timing ...................................................... 69
6.3.1 Metric for expressing the targets ....................................................... 69
6.3.1.1 Option TM_WTW: metric for setting the targets
based on Well-to-Wheel approach .................................... 69
6.3.1.2 Option TM_EMB: metric for setting the targets
based on embedded emissions ........................................... 70
6.3.1.3 Option TM_MIL: metric for setting the targets
based on mileage weighting .............................................. 72
6.3.2 Target levels for cars (TLC) and vans (TLV) ................................... 73
6.3.2.1 Introduction ....................................................................... 73
6.3.2.2 Economic impacts (including employment) ...................... 75
6.3.2.3 Social Impacts ................................................................... 99
6.3.2.4 Environmental impacts .................................................... 101
6.3.3 Timing of the targets (TT) ............................................................... 109
6.3.3.1 Option TT 1: The new fleet-wide targets start to
apply in 2030. .................................................................. 109
4
6.3.3.2 Option TT 2: New fleet-wide targets start to apply
in 2025, and stricter fleet-wide targets start to apply
in 2030. ............................................................................ 110
6.3.3.3 Option TT 3: New fleet-wide targets are defined for
each of the years until 2030. ............................................ 110
6.4 Distribution of effort (DOE) .......................................................................... 111
6.4.1.1 Methodology and introduction ........................................ 111
6.5 ZEV/ LEV incentives .................................................................................... 117
6.5.1 Introduction and methodological considerations ............................. 117
6.5.2 Passenger cars: assessment of options with additional
incentives for low-emission vehicles ............................................... 118
6.5.2.1 Economic impacts ........................................................... 119
6.5.2.2 Social Impacts ................................................................. 128
6.5.2.3 Environmental impacts .................................................... 129
6.5.3 Vans: assessment of options with additional incentives for
low-emission vehicles ..................................................................... 131
6.5.3.1 Economic impacts ........................................................... 132
6.5.3.2 Social Impacts ................................................................. 134
6.5.3.3 Environmental impacts .................................................... 135
6.5.4 Macroeconomic impacts, including employment, of setting
LEV incentives for cars and vans .................................................... 137
6.5.4.1 Introduction and methodological considerations............. 137
6.6 Elements supporting cost-effective implementation ..................................... 142
6.6.1 Eco-innovations (ECO) ................................................................... 142
6.6.1.1 Future review and possible adjustment of the cap on
the eco-innovation savings (Option ECO 1) ................... 142
6.6.1.2 Extend the scope of the eco-innovation regime to
include mobile air-conditioning (MAC) systems
including a future review and possible adjustment
of the cap on the eco-innovation savings (Option
ECO 2) ............................................................................. 143
6.6.2 Pooling (POOL) ............................................................................... 143
6.6.2.1 Change nothing (Option POOL 0) .................................. 143
6.6.2.2 An empowerment for the Commission to specify
the conditions for open pool arrangements (Option
POOL 1) .......................................................................... 144
6.6.3 Trading (TRADE) ........................................................................... 144
6.6.3.1 Change nothing (Option TRADE 0)................................ 144
6.6.3.2 Introduce trading as an additional modality for
reaching the CO2 targets and/or LEV mandates
(Option TRADE 1) .......................................................... 144
6.6.4 Banking and borrowing (BB) .......................................................... 145
6.6.4.1 Change nothing (Option BB 0)........................................ 145
6.6.4.2 Banking only (Option BB1) ............................................ 146
6.6.4.3 Banking and borrowing (Option BB 2) ........................... 147
5
6.6.5 Niche derogations for car manufacturers (NIC) .............................. 147
6.6.5.1 Change nothing (Option NIC 0) ...................................... 147
6.6.5.2 Set new derogation targets for niche manufacturers
(Option NIC 1) ................................................................ 148
6.6.5.3 Remove the niche derogation (Option NIC 2) ................ 149
6.7 Governance .................................................................................................... 150
6.7.1 Real-world emissions (RWG) ......................................................... 150
6.7.1.1 Change nothing (Option RWG 0).................................... 150
6.7.1.2 Option RWG 1: Collection, publication, and
monitoring of real world fuel consumption data ............. 150
6.7.2 Market surveillance (conformity of production, in service
conformity) (MSU) .......................................................................... 151
6.7.2.1 Option MSU 0 – no change ............................................. 151
6.7.2.2 Option MSU 1: Obligation to report deviations and
the introduction of a correction mechanism .................... 152
7 COMPARISON OF OPTIONS ............................................................................... 153
7.1 Emission targets ............................................................................................. 156
7.1.1 Emission target - Metric .................................................................. 156
7.1.2 Emission targets – timing ................................................................ 156
7.1.3 Emission targets – level for cars ...................................................... 157
7.1.4 Emission targets – level for vans ..................................................... 159
7.2 Distribution of efforts (cars and vans) ........................................................... 159
7.3 ZEV / LEV incentives ................................................................................... 160
7.3.1 ZEV / LEV incentives for cars ........................................................ 160
7.3.2 ZEV/LEV incentives for vans ......................................................... 163
7.4 Elements supporting cost-effective implementation ..................................... 164
7.4.1 Eco-innovations ............................................................................... 164
7.4.2 Pooling ............................................................................................. 164
7.4.3 Trading ............................................................................................ 164
7.4.4 Banking and borrowing ................................................................... 164
7.4.5 Niche derogations for car manufacturers ........................................ 165
7.4.6 Simplification (REFIT aspects) ....................................................... 165
7.5 Governance: real-world emissions – market surveillance ............................. 165
8 HOW WOULD IMPACTS BE MONITORED AND EVALUATED? ................. 167
8.1 Indicators ....................................................................................................... 167
8.2 Operational objectives ................................................................................... 168
6
List of figures
Figure 1: Overview of interlinkages between this initiative and other climate, energy and
transport related initiatives at EU level .................................................................... 12
Figure 2: Drivers, problems and objectives ...................................................................... 18
Figure 3: GHG emissions from cars and vans (1990-2015) ............................................. 19
Figure 4: Historical fleet CO2 emissions performance and current standards (gCO2/km
normalized to NEDC) for passenger cars (ICCT, 2017) .......................................... 22
Figure 5: EU-wide fleet target level trajectories for new cars under the different TLC
options ...................................................................................................................... 35
Figure 6: EU-wide fleet target level trajectories for new vans under the different TLV
options ...................................................................................................................... 36
Figure 7: Battery costs (USD/kWh) and battery energy density (Wh/L) ......................... 42
Figure 8: Evolution of Li-ion battery costs (USD/kWh) .................................................. 43
Figure 9: Projected trend of greenhouse gas emissions from road transport between 2005
and 2030 under the baseline ..................................................................................... 68
Figure 10: Passenger car fleet powertrain composition (new cars) in 2025 and 2030 under
different TLC options ............................................................................................... 74
Figure 11: Van fleet powertrain composition (new vans) in 2025 and 2030 under
different TLV options ............................................................................................... 75
Figure 12: Net economic savings over the vehicle lifetime from a societal perspective in
2025 and 2030 (EUR/car) ......................................................................................... 78
Figure 13: TCO-15 years (vehicle lifetime) (net savings in EUR/car in 2025 and 2030) 79
Figure 14: TCO-first user (5 years) (net savings in EUR/car in 2025 and 2030) ............ 80
Figure 15: Final energy demand (ktoe) for passenger cars over the period 2020-2040
under different TLC options ..................................................................................... 81
Figure 16: Share (%) of different fuel types in the final energy demand for cars (entire
fleet) under different TLC options - 2025 and 2030 ................................................ 82
Figure 17: Net economic savings over the vehicle lifetime from a societal perspective in
2025 and 2030 (EUR/van) ........................................................................................ 86
Figure 18: TCO-15 years (vehicle lifetime) in 2025 and 2030 (net savings in EUR/van)87
Figure 19: TCO-first user (5 years) in 2025 and 2030 (net savings in EUR/van)............ 88
7
Figure 20: Final energy demand (ktoe) for vans over the period 2020-2040 under
different TLV options ............................................................................................... 89
Figure 21: Share (%) of different fuel types in the final energy demand for vans (entire
fleet) under different TLV options –2025 and 2030 ................................................ 90
Figure 22: TCO-second user (years 6-10) (EUR/car) – 2025 and 2030......................... 100
Figure 23: TCO-second user (years 6-10) (EUR/van) – 2025 and 2030 ....................... 101
Figure 24: (Tailpipe) CO2 emissions of passenger cars in EU-28 - % reduction compared
to 2005 .................................................................................................................... 102
Figure 25: Cumulative (tailpipe) 2020-2040 CO2 emissions of cars for EU-28 – emission
reduction from the baseline (kt) ............................................................................. 103
Figure 26: (Tailpipe) CO2 emissions of vans in EU-28 - % reduction compared to 2005
................................................................................................................................ 105
Figure 27: Cumulative (tailpipe) 2020-2040 CO2 emissions of vans for EU-28 – emission
reduction from the baseline (kt) ............................................................................. 105
Figure 28: Evolution of GHG emissions between 2005 (100%) and 2030 under the
EUCO30 scenario and under the baseline and different policy options for the CO2
target levels for new cars and vans considered in this impact assessment ............. 107
Figure 29: Additional manufacturing costs (EUR/car) for categories of passenger car
manufacturers under different options DOE and with the EU-wide fleet CO2 target
levels as in option TLC30 ...................................................................................... 114
Figure 30: Additional manufacturing costs relative to vehicle price (% of car price) for
categories of passenger car manufacturers under different options DOE and with the
EU-wide fleet CO2 target levels as in option TLC30 ............................................. 114
Figure 31: Additional manufacturing costs (EUR/van) for categories of van
manufacturers under different options DOE and with the EU-wide fleet CO2 target
levels as in option TLV40 ...................................................................................... 115
Figure 32: Additional manufacturing costs relative to vehicle price (% of van price) for
categories of van manufacturers under different options DOE and with the EU-wide
fleet CO2 target levels as in option TLV40 ............................................................ 115
Figure 33: TCO-15 years (vehicle lifetime) (net savings in EUR/car for 2025 and 2030)
for different LEV incentive options ....................................................................... 121
Figure 34: Illustration of the impacts of option LEVT_CRED2 (net savings, TCO-15
years) in case the LEV benchmark is not exactly met (with the CO2 target of option
TLC30 and the benchmark of option LEV%_A) ................................................... 124
Figure 35: Illustration of the impacts of option LEVT_CRED1 (net savings, TCO-15
years) in case the LEV benchmark is not exactly met (with the CO2 target of option
TLC30 and the benchmark of option LEV%_A) ................................................... 125
8
Figure 36: TCO-second user (years 6-10) (EUR/car) in 2025 and 2030 for different
LEVD/LEVT options ............................................................................................. 129
Figure 37: TCO- 15 years (EUR/van) in 2025 and 2030 for different LEVD/LEVT
options .................................................................................................................... 133
Figure 38: TCO-second user (years 6-10) (EUR/van) in 2025 and 2030 for different
LEVD/LEVT options ............................................................................................. 135
9
GLOSSARY - ACRONYMS AND DEFINITIONS
ACEA Federation of European Car Manufacturers
BEV Battery Electric Vehicle
CNG Compressed Natural Gas
CO2 Carbon dioxide
EMIS Emission Measurements In the automotive Sector (Committee of
the European Parliament)
ESR Effort Sharing Regulation
ETS EU Emission Trading System
EV Electric Vehicle: covers BEV, FCEV and PHEV
FCEV Fuel Cell Electric Vehicle
FCM Fuel Consumption Measurement
GDP Gross Domestic Product
GHG Greenhouse gas(es)
HDV Heavy-Duty Vehicles, i.e. lorries, buses and coaches (vehicles of
more than 3.5 tons)
HEV Hybrid Electric Vehicle (not including PHEV)
ICEV Internal Combustion Engine Vehicle
IEA International Energy Agency
LCA Life-Cycle Assessment
LCV Light Commercial Vehicle(s): van(s)
LDV Light-Duty Vehicle(s), i.e. passenger cars and vans
LPG Liquified Petroleum Gas
LNG Liquefied Natural Gas
MAC Mobile Air Conditioning
NEDC New European Driving Cycle
NGO Non-Governmental Organisation
NOx Nitrogen oxides (nitric oxide (NO) and nitrogen dioxide (NO2))
O&M Operation and Maintenance
OECD Organisation for Economic Co-operation and Development
OBD On-Board Diagnostics
PHEV Plug-in Hybrid Electric Vehicle
PM Particulate matter
REEV Range Extended Electric Vehicle (sub-group of PHEV)
SAM Scientific Advice Mechanism
TLC CO2 Target Level for passenger Cars (policy option)
TLV CO2 Target Level for Vans (policy option)
TTW emissions "Tank-to-wheel" emissions: emissions from the vehicle tailpipe
that occur during the drive cycle of vehicles.
WLTP Worldwide Harmonised Light Vehicles Test Procedure
WTT emissions "Well-to-tank" emissions: emission occurring during fuel (incl.
electricity, hydrogen) production and transport
WTW emissions "Well-to-wheel" emissions: sum of TTW and WTT emissions
10
1 INTRODUCTION
1.1 Policy context
In his State of the Union Address 20171 President Juncker put it very clearly: while the
car industry is a key sector for Europe making world-class products, EU manufacturers
will need to invest in the clean cars of the future in order to maintain their strong
position. In addition, President Juncker stated "I want Europe to be the leader when it
comes to the fight against climate change" and announced that "the Commission will
shortly present proposals to reduce the carbon emissions of our transport sector".
The automotive industry is crucial for Europe's prosperity, providing jobs for 12
million people in manufacturing, sales, maintenance and transport and accounting for 4%
of the EU's GDP2, including in sectors such as steel, aluminium, plastics, chemicals,
textiles and ICT. The EU is among the world's biggest producers of motor vehicles and
demonstrates technological leadership in this sector.
EU industry, in general, and the automotive sector, in particular, are currently facing
major transformations. Digitalization and automation are transforming traditional
manufacturing proceses. Innovation in electrified power trains, autonomous driving and
connected vehicles constitute major challenges which may fundamentally transform the
sector.
Furthermore, following the Paris Agreement3, the world has committed to move
towards a low-carbon economy. Many countries are now implementing policies for low-
carbon transport, including vehicle standards, often in combination with measures to
improve air quality. These developments represent an opportunity for the EU automotive
sector to continue to innovate and adapt in order to ensure it remains a technological
leader.
The EU 2030 framework for climate and energy includes a target of an at least 40% cut
in domestic EU greenhouse gas (GHG) emissions compared to 1990 levels. The emission
reductions in the Emissions Trading System (ETS) and non-ETS sectors amount to at
least 43% and 30% by 2030 compared to 2005, respectively. The Commission has
recently proposed 2030 GHG emission reduction targets for Member States under the
Effort Sharing Regulation4 (covering the non-ETS sectors, including road transport) as
well as a revised Energy Efficiency Directive5. CO2 standards for light-duty vehicles will
help to meet the overall goals set out therein.
In addition to that, daily experience on traffic jams, the crisis over diesel cars emissions
and the adoption of policy measures at local level to discorage car use in urban areas,
1 President Jean-Claude Juncker's State of the Union Address 2017, http://europa.eu/rapid/press-
release_SPEECH-17-3165_en.htm
2 https://ec.europa.eu/growth/sectors/automotive_en
3 http://unfccc.int/paris_agreement/items/9485.php
4 Proposal for a Regulation on binding annual greenhouse gas emission reductions by Member States from
2021 to 2030 for a resilient Energy Union and to meet commitments under the Paris Agreement and
amending Regulation No 525/2013 of the European Parliament and the Council on a mechanism for
monitoring and reporting greenhouse gas emissions and other information relevant to climate change,
COM(2016) 482 final
5 Proposal for a Directive of the European Parliament and of the Council amending Directive 2012/27/EU
on energy efficiency, COM(2016) 761 final – In this, the Commission has proposed an energy
efficiency target of 30% for 2030.
11
have contributed to making EU consumers more aware of the impact of road transport on
health and air quality.
These developments take place globally since nowadays automotive industries are
increasingly integrated in global value chains. Global automotive markets are expanding
faster than ever before, notably in emerging markets such as India and China. The latter,
in particular, is taking full advantage of the changing automotive landscape and
according to a recent report by the International International Energy Agency , in 2016 it
became the country with the highest share of electric vehicles.
In addition, EU sales of passenger cars relative to global sales have decreased from 34%
before the crisis (2008/2009) to 20% today. This means that EU industry will have to
consider not only increasing exporting volumes but also adapting to changing demands
which will require more focus on innovation to retain competitiveness.
Until now, the ambitious emission reduction standards in place in Europe have
represented a fundamental tool to push for innovation and investments in low carbon
technologies. But today, the EU is no longer the clear leader in this race, with the
US, Japan, South Korea and China moving ahead very quickly.
As highlighted in the recently adopted Renewed Industrial Policy Strategy6, a modern
and competitive automotive industry is key for the EU economy. However, for the sector
to maintain its technological leadership and thrive in global markets, it will have to
accelerate the transition towards more sustainable technologies and new business models.
Only this will ensure that Europe will have the most competitive, innovative and
sustainable industry of the 2030 and beyond.
The Commission's Communication 'Europe on the Move: An agenda for a socially
fair transition towards clean, competitive and connected mobility for all'7 makes
clear that we want to make sure that the best low-emission, connected and automated
mobility solutions, equipment and vehicles will be developed, offered and manufactured
in Europe and that we have in place the most modern infrastructure to support them. The
Communication identifies that profound changes in how we enjoy mobility are underway
and that the EU must be a leader in shaping this change at a global level, building on the
key progress already made.
This Communication builds on the earlier Commission's European Strategy for Low-
Emission mobility8, published in July 2016, which set out an overall vision built on three
pillars: (i) moving towards zero-emission vehicles; (ii) low emission alternative energy
for transport; (iii) efficiency of the transport system.
The figure below presents an overview of the interlinkages between the various
initiatives of the mobility package proposed by the Commission as well as other related
EU climate, energy and transport related initiatives.
By pursuing an integrated approach looking both at the demand and supply side and
by establishing an enabling environment and a clear vision and robust regulatory
framework, the EU can create an environment that provides EU industry with the
certainty and clarity needed to innovate and remain competitive for the future.
6 COM(2017) 479 final
7 COM(2017) 283 final
8 COM(2016) 501 final
12
Figure 1: Overview of interlinkages between this initiative and other climate, energy and transport related initiatives at EU level
13
This builds on policies proposed or already implemented at national, regional and city
level in the EU. Many Member States have set objectives to increase the share of zero
and low emission vehicles, including both battery electric vehicles and plug-in hybrids,
by 20209.
However, while some Member States have made good progress in achieving their
objectives, the majority of Member States has made rather slow progress10
. Even if the
objectives were to be reached, the share of electric vehicles would remain low in the EU
in relation to total vehicle registrations. Furthermore, three Member States, representing
35% of total new car registrations in the EU in 2016, have announced plans to phase out
CO2 emitting cars (see Table 1).
At the same time, many cities in the EU have implemented regulations which limit the
access of certain vehicles to urban areas. Most restrictions are within the scope of so-
called Low Emission Zones which either limit the city entry of the most polluting
vehicles or, in some cases, impose higher fees for such vehicles if they enter the zone.
Recently some cities have even announced plans to ban diesel and/or petrol cars (see
Table 1).
Table 1: Overview of announcements at national and city level to encourage the use
of zero- and low-emission vehicles
Geographical coverage Announcements
Member States
France End the sale of new CO2 emitting cars by 204011
Netherlands End the sale of new CO2 emitting cars by 203012
United Kingdom End the sale of all new conventional petrol and diesel cars
and vans by 204013
Cities
Paris (France) Ban of diesel cars from 2024 and petrol cars from 203014
Madrid (Spain) and Athens Ban of diesel cars from 202515
9 Germany aims to become lead market for electric mobility and has set an objective of 1 million electric
vehicles on the road by 2020; France aims for 2.4 million electric vehicles on the road by 2023; Poland
aims to have 1 million electric vehicles on the road by 2025.
10 Commission Staff Working Document (2017), Detailed Assessment of National Policy Frameworks
under Directive 2014/94/EU. Greece, Malta, Romania, Slovenia, and the UK had not submitted their
NPF by the cut-off date of 1 August 2017; data may include electric buses, LDVs and HDVs
11 Ministère de la Transition écologique et solidaire (2017): Plan Climat, https://www.ecologique-
solidaire.gouv.fr/sites/default/files/2017.07.06 - Plan Climat.pdf
12 Coalition agreement of the new Dutch government, https://nltimes.nl/2017/10/10/new-dutch-
governments-plans-coming-years
13 UK Department for Environment Food & Rural Affairs (2017): UK plan for tackling roadside nitrogen
dioxide concentrations, An overview, July 2017,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/633269/air-quality-
plan-overview.pdf
14 Mairie de Paris (2017): Fin des véhicules diesel et essence: réaction de la Ville de Paris, Communiqué de
presse, 12/10/2017, https://presse.paris.fr/wp-content/uploads/2017/10/Fin-des-v%C3%A9hicules-
diesel-et-essence-r%C3%A9action-de-la-Ville-de-Paris.pdf
14
(Greece)
Oxford (UK) Ban of all non-electric vehicles in the city centre by 203516
A policy framework that further stimulates the accelerated uptake of zero- and low-
emission vehicles would complement the on-going efforts to address air quality problems
and would be well aligned with on-going action at city, regional, and national level.
Zero-emission vehicles do not only reduce CO2 emissions from road transport but deliver
also in terms of air pollutant and noise emission free transport.
1.2 Legal context
The EU has in place two Regulations setting CO2 targets for new passenger cars and
vans, respectively, which are based upon Article 192 of the TFEU (Environment
chapter):
Regulation (EC) No 443/2009 setting a fleet-wide average target for new
passenger cars of 130 g CO2/km from 2015 and 95g CO2/km from 2021, and
Regulation (EU) No 510/2011 setting a fleet-wide average target for new light
commercial vehicles of 175 g CO2/km from 2017 and 147 gCO2/km from 2020.
These regulations have been amended in 2014 through Regulation (EU) No 333/2014
and Regulation (EU) No 254/2014 in order to define the modalities for implementing the
2020/2021 targets.
Both Regulations request the Commission to carry out a review by the end of 2015, and
to report on it to the Council and the European Parliament, accompanied, if appropriate,
by a proposal to amend the Regulations for the period beyond 2020.
The abovementioned emission targets have been set on the basis of the New European
Driving Cycle (NEDC) test cycle. From 1 September 2017 on, a new regulatory test
procedure, the World Harmonised Light Vehicles Test Procedure (WLTP)17
, developed
in the context of the UNECE, has been introduced under the type approval legislation for
determining the emissions of CO2 and the new targets will need to take this into account.
Furthermore, consumer information on the fuel consumption and CO2 emission of new
passenger cars under Directive 1999/94/EC should be based on WLTP as of 1 January
201918
.
15 BBC (2017): Four major cities move to ban diesel vehicles by 2025, http://www.bbc.com/news/science-
environment-38170794
16 Reuters (2017): Oxford to become first UK city to ban petrol and diesel cars from center,
http://www.reuters.com/article/us-britain-autos-oxford/oxford-to-become-first-uk-city-to-ban-petrol-
and-diesel-cars-from-center-idUSKBN1CH1IQ?utm_source=34553&utm_medium=partner
17 Commission Regulation (EU) 2017/1151 of 1 June 2017
18 Commission Recommendation (EU) 2017/948 of 31 May 2017 on the use of fuel consumption and CO2
emission values type-approved and measured in accordance with the World Harmonised Light
Vehicles Test Procedure when making information available for consumers pursuant to Directive
1999/94/EC
15
1.3 Evaluation of the implementation
An extensive evaluation of the existing Regulations was carried out as part of REFIT.
This was completed in April 2015 and the final report of the consultants has been
published19
.
The evaluation report assessed the Regulations against the objectives set in the original
legislation, which included providing for a high level of environmental protection in the
EU and contributing to reaching the EU's climate change targets, reducing oil
consumption and thus improving the EU’s energy security of supply, fostering
innovation and the competitiveness of the European automotive industry and
encouraging research into fuel efficiency technologies.
It concluded that the Regulations were still relevant, broadly coherent, and had generated
significant emissions savings, while being more cost effective than originally anticipated
for meeting the targets set. They also generated significant EU added value that could not
have been achieved to the same extent through national measures. As regards impacts on
competitiveness and innovation, the impacts of the Regulations were found to be
generally positive.
Box 1 summarises the key outcomes in relation to the main evaluation criteria.
Box 1: Key conclusions of the report on the evaluation of Regulations (EC) No 443/2009 and (EU) No
510/2011 ('the Regulations')
Relevance
o The Regulations are still valid and will remain so for the period beyond 2020, as:
o all sectors need to contribute to the fight against climate change,
o the CO2 performance of new vehicles needs to improve at a faster rate,
o road transport needs to use less oil (to improve the security of energy supply), and
o CO2 reductions must be delivered cost-effectively without undermining either
sustainable mobility or the competitiveness of the automotive industry.
Effectiveness
o The Regulations have been more successful in reducing CO2 than previous voluntary
agreements with industry (annual improvement rate of 3.4-4.8 gCO2/km versus 1.1-1.9
gCO2/km).
o The passenger car CO2 Regulation is likely to have accounted for 65-85% of the reductions in
tailpipe emissions achieved following its introduction. For light commercial vehicles (LCVs),
the Regulation had an important role in speeding up emissions reductions.
o Impacts on competitiveness and innovation appear generally positive with no signs of
competitive distortion.
o The evaluation report highlighted the following weaknesses:
o The NEDC test cycle does not adequately reflect real-world emissions and there is
an increasing discrepancy between test cycle and real-world emissions performance
which has eroded the benefits of the Regulations.
o The Regulations do not consider emissions due to the production of fuels or
associated with vehicle production and disposal.
o Some design elements (modalities) of the Regulations are likely to have had an
impact on the efficiency of the Regulations. In particular, the use of mass as the
utility parameter penalises the mass reduction as an emissions abatement option.
19 Ricardo-AEA and TEPR (2015), Evaluation of Regulations 443/2009 and 510/2011 on the reduction of
CO2 emissions from light-duty vehicles, available at:
https://ec.europa.eu/clima/sites/clima/files/transport/vehicles/docs/evaluation_ldv_co2_regs_en.pdf
16
Efficiency
o The Regulations have generated net economic benefits to society.
o Costs to manufacturers have been much lower than originally anticipated as emissions
abatement technologies have, in general, proved less costly than expected. For passenger
cars, the ex-post average unit costs for meeting the target of 130gCO2/km are estimated at
€183 per car, while estimates prior to the introduction of the Regulation ranged from €430-
984 per car. For LCVs the ex-post estimate to meet the 175gCO2/km was €115 per vehicle,
compared with an ex ante estimate of €1,037 per vehicle.
o Lifetime fuel expenditure savings exceed upfront manufacturing costs, but have been lower
than anticipated, primarily because of the increasing divergence between test cycle and real
world emissions performance.
Coherence
o The Regulations are largely coherent internally and with each other.
o Modalities potentially weakening the Regulations, albeit with limited impacts, are the
derogation for niche manufacturers, super-credits and the phase-in period (cars).
EU added value
o The harmonisation of the market is the most crucial aspect of EU added-value and it is
unlikely that uncoordinated action would have been as efficient. The Regulations ensure
common requirements, thus minimising costs for manufacturers, and provide regulatory
certainty.
The evaluation report included some recommendations that would ensure the Regulations
remain relevant, coherent, effective and efficient, including:
With respect to relevance, a potential additional need to be considered for the post
2020 legislation is that road transport needs to use less energy. Hence, energy
efficiency would become a more important metric as the LDV fleet moves to a
more diverse mix of powertrains
Concerning effectiveness, the most significant weakness identified was the
current (NEDC) test cycle causing an increasing discrepancy between real-world
and test cycle emissions, which has eroded a significant portion of the originally
expected benefits of the Regulations. This will be largely addressed by the
development of WLTP. In addition, sufficient checks are recommended to ensure
that the new test does not in future years become subject to the same problems
experienced with the NEDC.
While the lack of consideration of the lifecycle and embedded emissions of
vehicles was seen as a relatively minor issue, it was expected to become more
significant as the proportion of electric vehicles increases.
As regards additional incentives to develop low CO2 emission vehicles, it should
be considered whether such mechanism is needed and, if so, to choose one that
does not potentially weaken the target.
A need to look at how to improve the ex-ante assessment of costs to
manufacturers as the costs assumed prior to the introduction of the current
Regulations were much higher than has been the case in reality.
These recommendations are addressed when presenting the policy options in Section 5.
17
2 WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM?
Figure 1 sets out the drivers, problems and objectives that are relevant for the revision of
CO2 standards for cars and vans.
While the revision will clearly contribute to all three policy objectives, it should also be
clear that it does not aim to address all of the problems and drivers mentioned to the
same extent. For this, complementary proposals and flanking measures will be taken,
some of are scheduled to be part of the same package of mobility related initiatives. This
concerns in particular the EU Action Plan on the Alternative Fuels Infrastructure
Directive (limited infrastructure), the proposal for a revised Clean Vehicles Directive
2009/33/EC, as well as the proposal for a revised Directive on road charging
("Eurovignette").
The Commission is also preparing a proposal for setting CO2 standards for heavy-duty
vehicles, which would further help to tackle CO2 emissions in the road transport sector.
Beside this, there are a number of areas where complementary Member State or local
action would help to tackle the drivers and problems, e.g. through tax measures (in order
to help lowering upfront costs, especially for zero- and low-emission vehicles), and
measures promoting modal shift (i.e. lowering road transport activity.
A key driver to be addressed by this impact assessment is the lack of stringency of the
existing CO2 standards for the period beyond 2021 and the related uncertainty over future
standards. Other drivers are addressed to a different degree in the policy options set out
in Section 5. Clarifying the policy framework beyond 2021 will help reducing
manufacturers' uncertainty over costs and future investment decisions as well as tackling
certain market failures. Creating a market demand for more efficient vehicles will also
help to reduce upfront costs. In addition, the 'emissions gap' will be addressed.
By contrast, limited infrastructure and increasing transport activity are not directly
tackled by the options considered in this impact assessment.
2.1 What is the nature of the problem? What is the size of the problem?
An overview of the problems and drivers is presented in Figure 2.
18
Figure 2: Drivers, problems and objectives
19
2.1.1 Problem 1: Insufficient uptake of the most efficient vehicles, including low and
zero emission vehicles, to meet Paris Agreement commitments and to improve
air quality, notably in urban areas
The evaluation of the CO2 Regulations showed that the CO2 standards have stimulated
the uptake of more efficient vehicle technologies, but it also highlighted that the CO2
performance of new vehicles needs to improve at a faster rate in order to achieve the
Union's climate goals of at least 40% emissions reduction, as committed under the Paris
Agreement, in a cost-effective way. As confirmed in the European Strategy for Low-
Emission Mobility, greenhouse gas emissions from transport will need to be at least 60%
lower than in 1990 and be firmly on the path towards zero.20
With current trends in new
vehicles' CO2 emissions, this cannot be achieved. More specifically, the uptake of LEV
and ZEV is still very slow. In 2016, battery electric vehicles (BEV) and plug-in hybrid
electric vehicles (PHEV) represented only 1.1% of the new EU car fleet (for BEV the
share was only 0.41%).21
Road transport was responsible for 22%22
of EU GHG emissions in 2015 with a steady
increase since 1990 when the share was 13%. GHG emissions from cars and vans
accounted for 73% of road transport emissions in 2015; this share has remained more or
less constant since 1990.
Figure 3 shows that CO2 emissions from cars and light commercial vehicles in 2015 were
still 19% higher than in 1990, despite the decrease observed between 2007 and 2013.
While the increase in the share of transport emissions of EU GHG emission may be due
to the emissions reduction in other sectors, the evolution of GHG emissions from cars
and vans shows a steady increase since 1990 with the exception of the period between
2007 and 2013 when emissions were reduced.
Figure 3: GHG emissions from cars and vans (1990-2015)23
20 COM(2016) 501 final
21 Final CO2 monitoring data for 2015 (cars), http://www.eea.europa.eu/data-and-maps/data/co2-cars-
emission-11
22 This share does not cover the emissions from international shipping, which are not part of the 2020 and
2030 climate and energy targets.
23 EEA GHG data viewer (http://www.eea.europa.eu/data-and-maps/data/data-viewers/greenhouse-gases-
viewer), extracted on 01/09/2017
20
While the transport sector has considerably reduced its emissions of air pollutants in the
EU over the last decades, it is the largest contributor to NOx emissions (46% in total NOx
emissions in the EU in 2014). Of the total emitted NOx from road transport, around 80%
comes from diesel powered vehicles. In addition, the transport sector makes an important
contribution to the concentration of particulate matter in the atmosphere (13% for PM10
and 15% for PM2.5).24
EU air quality legislation25
sets limit and target values for the concentration of a range of
harmful air pollutants in ambient air in order to limit the exposure of citizens. Today, the
limit values for NO2 are being exceeded in over 130 cities across 23 Member States and
the Commission has initiated legal action against 12 Member States.
The public debate on the announcement of possible "diesel bans" in some major cities
has significantly affected the share of diesel vehicles in new car registrations. For
instance, in March 2017 a 5-year low in new diesel car registrations was recorded in
France, Germany, Spain, and the UK. These Member States represent together almost
60% of new car registrations in the EU.26
In the EU as a whole the share of diesel in new car registrations decreased from a peak of
53% in 2014 to 49% in 2016. At the same time the share of new petrol cars increased
from 44% in 2014 to 47%. 27
While urban access restrictions contribute to a shift from diesel to petrol with benefits in
terms of lower air pollutant emissions, so far they have not triggered a significant
increase in low- and zero-emission vehicles. Although new registrations of battery
electric and plug-in hybrid vehicles increased by 46% by July 2017 compared to the
same period in 2016, their share in total car registrations in the EU remains low at 1.2%
of which 46% were battery electric vehicles28
.
A policy framework that further stimulates the accelerated uptake of zero- and low-
emission vehicles would therefore complement the on-going efforts to address air quality
problems and would be well aligned with on-going action at urban, regional, and national
level. Zero-emission vehicles do not only deliver benefits in terms of air pollutant and
noise emission free transport but also contribute to the reduction of CO2 emissions from
road transport.
2.1.2 Problem 2: Consumers miss out on possible fuel savings
In understanding potential fuel savings for consumers, including initial and subsequent
vehicle purchasers it is important to understand that the current average lifetime of a car
is around 15 years29
with several ownership changes. Consumers have benefitted from
24 EEA (2016): Air quality in Europe - 2016 report. EEA Report No 28/2016,
25 Directive 2008/50/EC of the European Parliament and of the Council of 21 May 2008 on ambient air
quality and cleaner air for Europe, OJ L 152, 11.6.2008, p. 1.
26 ICCT (2017): Cities driving diesel out of the European car market,
http://www.theicct.org/blogs/staff/cities-driving-diesel-out-european-car-market
27 Monitoring of CO2 emissions from passenger cars – Regulation 443/2009:
https://www.eea.europa.eu/data-and-maps/data/co2-cars-emission-12/#parentfieldname-title
28 European Alternative Fuels Observatory, http://www.eafo.eu/eu#eu_pev_mark_shr_graph_anchor
29 Ricardo-AEA (2015): Improvements to the definition of lifetime mileage of light duty vehicles,
(https://ec.europa.eu/clima/sites/clima/files/transport/vehicles/docs/ldv_mileage_improvement_en.pdf)
. Cars in the European Union are on average 9.7 years old:
http://www.acea.be/statistics/tag/category/average-vehicle-age
21
net savings over a vehicle's lifetime, although relatively few consumers consider fuel
consumption when purchasing a new car30
.
So far the increases in the purchase prices of more efficient vehicles, as a result of the
CO2 standards, have been significantly lower than the fuel savings over the vehicle's
lifetime.
According to the evaluation of the CO2 Regulations the additional purchase cost of a new
car in 2013 was €183 higher compared with a 2006 vehicle due to measures to meet the
CO2 standards. At the same time (discounted) fuel savings, as a result of the CO2
standards, were €1,336 for petrol cars and €981 for diesel cars over the vehicle's lifetime.
Lifetime fuel expenditure savings have been lower than anticipated, primarily because of
the increasing divergence between test cycle and real world emissions performance.
However, even if this gap were to be reduced significantly by the introduction of the
WLTP test cycle and additional governance measures (see section 5.5), there remains an
important unused cost savings potential. If this potential were to be exploited through
more stringent CO2 standards, consumers could benefit from even higher fuel savings.
The savings are however spread differently across the vehicle's lifetime.
An analysis of second hand car and van markets and implications for the cost
effectiveness and social equity of light-duty vehicles CO2 regulations31
shows that
subsequent owners of a vehicle, who on average belong to lower income groups,
proportionally benefit more from fuels saving than first vehicle owners. The initial cost
for the more efficient vehicle is borne by the first owner. This depends however strongly
on the initial price premium for the more efficient vehicle.
2.1.3 Problem 3: Risk of losing the EU's competitive advantage due to insufficient
innovation in low- emission automotive technologies over the long term
The EU automotive sector is crucial to the EU economy, including in terms of the
number of direct and indirect jobs it provides. It faces global competition in terms of
sales to other markets and, increasingly, from non-EU manufacturers within the EU
market. The import of motor vehicles to the EU has increased from 2.5 million vehicles
in 2010 to 3.4 million motor vehicles in 2016, worth € 45.7 billion.32
The competitiveness of industry is also related to its capacity to innovate. Looking at the
relationship between the regulatory standards and industrial innovation, the Evaluation
study found that EU fuel efficiency standards for new cars and vans have proven to be a
strong driver for innovation and efficiency in automotive technology.33
These targets
allowed the EU manufacturers to have a first mover competitive advantage which has
30 Eurobarometer survey on climate change in 2017 shows that fewer than one in ten citizens (9%) have
bought a new car partly for its low fuel consumption, down from 13% in 2015.
(https://ec.europa.eu/clima/news/eu-citizens-increasingly-concerned-about-climate-change-and-see-
economic-benefits-taking-action_en)
31 TM Leuven (2016): Data gathering and analysis to improve the understanding of 2nd hand car and LDV
markets and implications for the cost effectiveness and social equity of LDV CO2 regulations. Final
Report, https://ec.europa.eu/clima/sites/clima/files/transport/vehicles/docs/2nd_hand_cars_en.pdf
32 ACEA (2017): Imports of Motor Vehicles, http://www.acea.be/statistics/tag/category/imports-of-motor-
vehicles (accessed 23 June 2017)
33 Ricardo-AEA and TEPR (2015), Evaluation of Regulations 443/2009 and 510/2011 on the reduction of
CO2 emissions from light-duty vehicles
22
been especially important as the EU automotive industry exported more than 6 million
vehicles in 2016, worth €135 billion.34
However, as shown in Figure 4, different fuel standards have progressively been
implemented around the world, in countries including China, USA, South Korea,
Mexico, Brazil and India. These international targets, moving over time towards the
levels set in the EU, and coupled with the commitments made on climate change targets
under the 2015 Paris Agreement, demonstrate the international demand for efficient
vehicles.
Figure 4: Historical fleet CO2 emissions performance and current standards
(gCO2/km normalized to NEDC) for passenger cars35
(ICCT, 2017)
Major non-EU car markets have considered or are about to introduce more ambitious
policies including measures to reduce pollutant emissions. In particular, in view of
increasing the deployment of zero- and low emission vehicles, ambitious policies have
been developed or recently adopted in car markets that are of particular importance for
the EU car industry. In the US, the Californian "ZEV" standards to support the market
deployment of battery electric, plug-in hybrid, and fuel cell vehicles have also been
adopted by nine other States (29% of all new cars sold in the U.S. are sold in these 10
States) (see Box 2 for more details).36
Eight US States have signed a memorandum of
understanding committing to coordinated action to ensure that by 2025 at least 3.3
million pure battery electric vehicles, plug-in hybrid electric vehicles and hydrogen fuel
cell electric vehicles are on their roads.37
34 ACEA (2017): Exports of Motor Vehicles, http://www.acea.be/statistics/tag/category/exports-of-motor-
vehicles (accessed 23 June 2017)
35 ICCT (2017): 2017 Global update light-duty vehicle greenhouse gas and fuel economy standards,
http://www.theicct.org/sites/default/files/publications/2017-Global-LDV-Standards-Update_ICCT-
Report_23062017_vF.pdf, p. 10
36 CARB (2017): California’s Advanced Clean Cars Midterm Review - Summary Report for the Technical
Analysis of the Light Duty Vehicle Standards,
https://www.arb.ca.gov/msprog/acc/mtr/acc_mtr_summaryreport.pdf
37 https://www.zevstates.us/
23
In China, new mandatory "new energy vehicle" (NEV) requirements will apply to car
manufacturers as from 2019 covering battery electric, plug-in hybrid, and fuel cell
vehicles (see Box 3 for more details).38
The requirements are applicable to all
manufacturers with an annual production or import volume of 30,000 or more
conventional fuel passenger cars.
Over the last decade China has become the key car market with 24 million new car
registrations, meaning that every third new vehicle is now being sold in China. European
car manufacturers have been successful in reaching out to this new market. More than
20% of new passenger cars sold in China were from European car manufacturers/joint
ventures operating in China. One third of global sales by German manufacturers, i.e.
around 15 million vehicles, took place in China: 39% for the VW Group and 22% for the
BMW Group and Mercedes Benz Cars39
. Similarly, China is the most important car
market for the PSA Group with more than 600,000 vehicles sold40
.
A recent analysis of seven global automotive lead markets concludes that China is now in
the "pole position" and will dominate the increasing market for electrified powertrains
for the foreseeable future due to the importance of the Chinese market and a favourable
regulatory framework.41
While Japan alone accounts for 40% of EV related patents, the EU automotive industry is
the global leader in automotive patents in general.42
At the same time patents data show
that parts of the European car industry have a strong technological potential in LEV/ZEV
which are however not sufficiently reflected in new products offered on the European
market.43
This indicates that the EU industry risks losing its technological leadership and lagging
behind these global trends.
2.2 What are the main drivers?
2.2.1 Driver 1: Consumers value upfront costs over lifetime costs
There are a number of market failures and barriers44
which cause end-users to not
necessarily purchase the most efficient new vehicles available on the market, even where
38 http://www.miit.gov.cn/n1146295/n1146557/n1146624/c5824932/content.html
39 EY (2017): Der Pkw-Absatzmarkt China 2009 bis 2016,
http://www.ey.com/Publication/vwLUAssets/ey-auto-absatzmarkt-china-2017/$FILE/ey-auto-
absatzmarkt-china-2017.pdf
40 PSA Group (2017): Chine et Asie du Sud-Est, https://www.groupe-psa.com/fr/groupe-
automobile/presence-internationale/chine-asie-sud-est/
41 Roland Berger, Forschungsgesellschaft Kraftfahrwesen mbH Aachen (2017): Study E-mobility Index Q2
2017, June 2017, https://www.fka.de/consulting/studien/e-mobility-index-2017-q2-e.pdf (accessed
18/06/2017)
42 ACEA (2017): Decarbonisation of transport – impact on jobs. Stakeholder Meeting organised by the
European Commission, DG CLIMA, 26 June 2017, Brussels.
43 Falck, O. et al. (2017): "Auswirkungen eines Zulassungsverbots für Personenkraftwagen und leichte
Nutzfahrzeuge mit Verbrennungsmotoren" ifo Institut, http://www.cesifo-
group.de/portal/page/portal/DocBase_Service/studien/Studie-2017-Falck-etal-Zulassungsverbot-
Verbrennungsmotoren.pdf
44 See e.g.: 'Mind the Gap, Quantifying Principle-Agent Problems in Energy Efficiency', IEA,
https://www.iea.org/publications/freepublications/publication/mind_the_gap.pdf'; 'Market failures and
barriers as a basis for clean energy policies', Marilyn A Brown, Energy Policy volume 29, issue 14,
Nov 2001, pp 1197-1207; Greene, David (2010) Why the market for new passenger cars generally
24
this would be their optimal choice from an economic perspective, i.e. when the fuel
economy benefit outweighs the additional costs for a more efficient vehicle.
When purchasing a new car, end-users tend to undervalue future fuel savings as a result
of which it may not appear attractive to pay more for a more efficient vehicle. This is for
instance empirically evidenced by the results of the evaluation of the CO2 Regulations,
which show that fuel savings are significantly higher than the additional purchase cost of
a new car (see Section 1.3). Despite existing fuel taxes, these clear financial benefits
were apparently not reaped by the market, but required specific regulation to tap into
such economic benefits.
Furthermore, even if the new vehicle purchasers do take account of fuel savings, it would
only be rational for them to consider fuel savings for the period in which they intend to
own the vehicle. As vehicles have an average lifetime of about 15 years with 4 owners,
only a part of the reductions would be experienced by the initial purchaser.
In addition, a wide range of factors and elements other than fuel economy may dominate
the purchase decision of a new car. Purchasers of new cars have skewed preferences
away from fuel economy and towards factors such as comfort and power.45
Another
reason for the apparently economically suboptimal uptake of more efficient vehicles
therefore lies on the production side. In a highly competitive automotive market,
manufacturers may be hesitant to invest heavily in more efficient powertrains, knowing
that competitors may have different commercial strategies (focusing on other vehicle
attributes such as higher engine capacity, more comfort, etc.) that could be commercially
more successful. This is in particular the case if consumers pay little attention to total
cost of ownership. A regulatory framework on CO2 emissions for all new vehicles takes
away the competitive risk that a manufacturer would be facing when focusing innovation
efforts on fuel efficiency, while others do not.
Different purchase dynamics may apply for leased vehicles which have a share of around
30% of new registrations in the EU, with most of them being company cars. Leasing
could in principle increase the attractiveness of lower CO2 vehicles, on the one hand by
enabling instant payback on fuel saving ‘investments’, and on the other by helping
operators optimise vehicle choice by enabling them to better take into account the costs
and benefits associated with lower CO2 vehicles in the context of CO2-based national
vehicle taxation schemes. However, the extent to which these factors affect the uptake of
lower CO2 vehicles in practice could not be quantified due to a current lack of
evidence.46
undervalues fuel economy, OECD/ITF Joint Transport Research Centre Discussion Paper, No. 2010-6
(http://dx.doi.org/10.1787/5kmjp68qtm6f-en)
45 CAP HPI Consulting (2016): A study into the fitment and pricing of optional extras onto new motor
vehicles in the UK and their resale in the used market.
https://ec.europa.eu/clima/sites/clima/files/transport/vehicles/docs/uk_automotive_study_en.pdf
46 Ricardo Energy & Environment (2016): Consideration of light duty vehicle leasing in relation to the cost
effectiveness of LDV CO2 regulation.
(https://ec.europa.eu/clima/sites/clima/files/transport/vehicles/docs/ldv_leasing_en.pdf): "In France
and the UK, leased vehicles across most segments and fuel types have significantly lower CO2
emissions ratings than the average new vehicle. However, it is not clear how non-leased company cars
perform in comparison and so it is difficult to draw conclusions. "
25
2.2.2 Driver 2: Consumers' concerns regarding zero emission vehicles (ZEV)
Beyond the issue of undervaluing future benefits from fuel savings, the limited market
uptake of ZEV is strongly influenced by additional factors. ZEV (battery EV and fuel
cell EV) are still faced with much higher upfront costs47
as compared to conventional
vehicles.48
Consumers are also concerned about other issues regarding ZEV. As demonstrated in
research49
, a major barrier is consumer resistance to new technologies that are considered
alien or unproved. As other barriers perceived by the consumers, the study mentioned
battery range, charging infrastructure, reliability, safety. Furthermore, the perceived
limited comfort and style were seen as limiting the attractiveness of available ZEV
models.
A key barrier is 'range anxiety', i.e. the perception that the battery capacity is limited and
recharging infrastructure is insufficient to ensure recharging 'on time' and at the
necessary recharging speed in particular for long-distance trips. This is underlined by the
fact that the electric range for the most sold battery electric vehicles in the EU is
currently between 150 and 250 km.
Despite important progress and sufficient coverage in most Member States given the low
uptake of ZEV so far, the infrastructure for recharging ZEV is insufficient in many
Member States in particular in view of the expected uptake of ZEVs by 2020 and
beyond50
. The Commission's Communication, 'Europe on the Move: An agenda for a
socially fair transition towards clean, competitive and connected mobility for all'
underlines that the deployment of a network of recharging points covering evenly the
whole EU road network, is a key enabling condition for zero-emission mobility. The
Action Plan on the Alternative Fuels Infrastructure Directive sets out concrete measures
for achieving necessary deployment rates51
. Experience from other regions shows that
with an increase in the number of electric vehicles sold investments in the necessary
infrastructure increases as well. Besides, reinforced support for research and
development of batteries will be provided by Horizon 2020 in the context of the new
working programme 2018-2020.
47 ICCT (2016): Electric vehicles: Literature review of technology costs and carbon emissions, Working
Paper 2016-14, http://www.theicct.org/sites/default/files/publications/ICCT_LitRvw_EV-tech-
costs_201607.pdf
48 Some studies have suggested that convergence of total cost of ownership for some ZEV may occur by
2020, see, for example Element Energy (2016): Low carbon cars in the 2020s. Consumer impacts and
EU policy implications, http://www.beuc.eu/publications/beuc-x-2016-
121_low_carbon_cars_in_the_2020s-report.pdf (04/05/2017)
49 Egbue, O.l Long, S. (2012): Barriers to wide spread adoption of electric vehicles: An analysis of
consumer attitudes and perceptions, Energy Policy, Vol. 48, p. 717–729,
http://dx.doi.org/10.1016/j.enpol.2012.06.009
50 Commission Staff Working Document (2017), Detailed Assessment of National Policy Frameworks
under Directive 2014/94/EU.
51 Communication from the Commission to the European Parliament, the Council, the European Economic
and Social Committee and the Committee of the Regions. Towards the broadest use of alternative fuels
– an Action Plan on Alternative Fuels Infrastructure under Article 10(6) of Directive 2014/94/EU,
including the assessment of national policy frameworks unde rARticle 10(2) of Directive 2014/94/EU.
26
Another concern among consumers is linked to the resale value of ZEV given expected
further technical improvements in particular on the battery's performance (range,
lifetime, costs).52
At the same, the market for ZEV is developing rapidly. New technologies and business
models may help to overcome some of the barriers discussed above. For example, new
ZEV in the compact car segment are offered in Europe with ranges of up to 380 km53
.
Some ZEV are offered with a lease contract for the battery54
which lowers upfront costs
and can address possible consumer concerns related to the battery technology.
In this context, it should be noted that consumer research in the US and Germany showed
that a large share of prospective new vehicle buyers (29% in the US, 44% in Germany)
would consider purchasing a battery electric vehicle (BEV) or a plug-in hybrid electric
vehicle (PHEV), which indicates a substantial latent demand for such vehicles. However,
it was also found that half of all consumers are not yet familiar with electric vehicles.
The researchers conclude that there is an opportunity for manufacturers to quickly
increase the number of potential buyers by offering more tailored EVs and deploying
new business models55
. A JRC study covering six EU Member States56
concluded in
2012 that on average around 40% of the car drivers surveyed would consider buying an
electric car when changing their current vehicle57
.
2.2.3 Driver 3: EU standards do not provide enough incentive for further efficiency
improvements and for the deployment of low and zero emission vehicles for the
period beyond 2021, leading to uncertainty over future policy
The current Regulations for cars and vans set targets of 95 g CO2/km for 2021 and 147 g
CO2/km for 2020 respectively. In the absence of new legislation, these targets will
remain at their present levels. As the current targets can be largely met by improving
conventional vehicles, they do not provide sufficient incentive to invest in and in
particular market alternative powertrains, in particular ZEV.
As a consequence there is insufficient uptake of LEVs and ZEVs in the EU as a result of
which the necessary GHG emission reductions in the road transport sector cannot be
achieved. Given persisting market failures (see Driver 1) under these conditions
manufacturers are not likely to develop, produce and offer more efficient vehicles for the
EU market at sufficient scale. The EU automotive industry therefore risks losing
leadership in low-emission technologies for road transport.
52 European Environment Agency (2016): Electric vehicles in Europe, EEA Report No 20/2016
53 The new Opel Ampera-e has an electric range of 380 km (WLTP) and 520 km (NEDC), source:
http://media.opel.com/media/intl/en/opel/vehicles/ampera-
e/2017.detail.html/content/Pages/presskits/intl/en/2017/opel/04-21-ampera-e-new-way-of-driving.html
54 Renault offers the new ZOE with a lease contract for the battery, source:
https://fr.renault.be/vehicules/vehicules-electriques/zoe.html.
55 McKinsey&Company (2017) Electrifying insights: How automakers can drive electrified vehicle sales
and profitability (http://www.mckinsey.com/industries/automotive-and-assembly/our-
insights/electrifying-insights-how-automakers-can-drive-electrified-vehicle-sales-and-profitability)
56 France, Germany, Italy, Poland, Spain, United Kingdom
57 Thiel, C., Alemanno, A., Scarcella, G, Zubaryeva, A., Pasaoglu, K. (2012): Attitude of European car
drivers towards electric vehicles: a survey,
http://publications.jrc.ec.europa.eu/repository/handle/JRC76867
27
As long as the automotive industry, including manufacturers and suppliers, does not
know what will happen to targets beyond 2020/2021 and whether any additional
requirements will be put in place, they do not have the regulatory certainty required to
invest with confidence for the EU market. Without clarity on the long-term regulatory
framework companies cannot take long-term investment decisions in order to meet future
market demands and optimise compliance costs.
2.2.4 Driver 4: Effectiveness of standards is reduced by growing 'emissions gap'
There is evidence of an increasing divergence between average test and real world CO2
emissions. Recent studies estimate the divergence is up to around 40%58
. A number of
factors have been identified to explain the divergence including the deployment of CO2
reducing technologies delivering more savings under test conditions than on the road, the
optimisation of the test procedure as well as the increased deployment of energy using
devices which are not taken into account when a vehicle is tested for its certified CO2
emissions. For example, air conditioning systems are not included when a vehicle is
tested for its certified CO2 emissions but are widely installed and used, thus leading to
higher real world emissions.
This increasing divergence means that the actual CO2 savings achieved are considerably
less than those suggested by the test performance. Since manufacturers' compliance with
their specific emissions target is assessed on the basis of the CO2 emissions as certified
during the official test cycle, the 'emissions gap' undermines the effectiveness of the CO2
performance standards. In addition, the 'emissions gap' has undermined consumers' trust
in the potential CO2/fuel savings of new vehicles which in turn may have affected
consumers' willingness to buy the most efficient vehicles.
2.2.5 Driver 5: Road transport activity is increasing
EU transport activity is expected to continue growing under current trends and adopted
policies, albeit at a slower pace than in the past59
. Despite profound shifts in mobility
being underway, such as shared mobility services and easier shifts between modes,
passenger traffic growth is still projected to increase 23% by 2030 (1% per year) and
42% by 2050 (0.9% per year) relative to 2010. Road transport would maintain its
dominant role within the EU. Passenger cars and vans would still contribute 70% of
passenger traffic by 2030 and about two thirds by 2050, despite growing at lower pace
relative to other modes due to slowdown in car ownership increase.
While this increased activity is reflective of economic growth, it brings with it negative
impacts in terms of GHG emissions and air quality impacts, if no additional measures are
taken. It remains to be seen to what extent other developments such as autonomous
driving may affect road transport activity.
58 Scientific Advice Mechanism (SAM) (2016): Closing the gap between light-duty vehicle real-world CO2
emissions and laboratory testing, High Level Group of Scientific Advisors, Scientific Opinion 01,
Brussels, 11 November 2016; Zacharof, N., Fontaras, G., Ciuffo, B., Tsiakmakis, S. et al. (2016)
Review of in use factors affecting the fuel consumption and CO2 emissions of passenger cars (EUR
27819 EN; doi:10.2790/140640)
59 Impact Assessment accompanying the Proposal for a Directive of the European Parliament and of the
Council amending Directive 1999/62/EC on the charging of heavy goods vehicles for the use of
certain infrastructures and Proposal for a Council Directive amending Directive 1999/62/EC on the
charging of heavy goods vehicles for the use of certain infrastructures, as regards certain provisions on
vehicle taxation, Commission Staff Working Document, SWD(2017) 180 final.
28
2.3 Who is affected and how?
The users of vehicles, both individuals and businesses, are affected because they face the
cost of the energy required to propel the vehicles. Reducing the vehicle's CO2 emissions
will reduce the energy required and result in a cost saving to the user. The use of
technology to reduce in-use GHG emissions has a cost which is expected to be passed on
to the vehicle purchaser.
Citizens, especially those living in urban areas with high concentrations of pollutants,
will benefit from better air quality and less associated health problems due to reduced air
pollutant emissions, in particular when the uptake of zero-emission vehicles increases.
CO2 standards require vehicle manufacturers to reduce CO2 emissions as a result of
which they will have to introduce technical CO2 reduction measures. In the short-term,
this is likely to result in increased production costs and could affect the structure of their
product portfolios. However, demand for low- and zero-emission CO2 vehicles is
expected to increase throughout the world as climate change and air quality policies
develop and other countries introduce similar or even more ambitious standards,
manufacturers have an opportunity to gain first mover advantage and the potential to sell
advanced low CO2 vehicles in other markets.
Suppliers of components and materials from which vehicles are constructed will be
affected by changing demands on them. Component suppliers have a key role in
researching and developing technologies and marketing them to vehicle manufacturers.
Requirements leading to the uptake of additional technologies or materials (e.g.
aluminium, plastics, advanced construction materials) may create extra business activity
for them. While often overlooked, EU employment in the component supply industry is
as large as in the vehicle manufacturing industry.
Suppliers of fuels are affected by reduced energy demand leading to less utilisation of
existing infrastructure. If demand shifts to vehicles supplied with alternative energy
sources, this may potentially increase the need for other types of infrastructure and create
new business opportunities and challenges for electricity supply companies and network
operators.
There may also be impacts for example in the need for or type of vehicle servicing. There
will also be lower maintenance requirements for battery electric vehicles.
The production and maintenance of vehicles with an electrified powertrain will pose
important challenges to the workforce in the automotive sector including manufacturers
and component suppliers as well as repair and maintenance businesses. The workforce
will need additional and/or different skills to deal with new components and
manufacturing processes.
Other users of fuel and oil-related products (e.g. chemical industry, heating) are expected
to benefit from lower prices if demand from the transport sector decreases. Sectors other
than transport that emit GHGs will avoid demands to further reduce emissions to
compensate for increased transport emissions. In so far as these sectors are exposed to
competition, this will be important for their competitiveness.
3 WHY SHOULD THE EU ACT?
3.1 The EU's right to act
The Environment chapter of the Treaty, in particular Article 191 and Article 192 of
TFEU, give the EU the right to act in order to guarantee a high level of environmental
29
protection. As mentioned in Section 1.1, based on Article 192 TFEU, the EU has already
acted in the area of vehicle emissions, including adopting Regulations (EC) 443/2009
and (EU) 510/2011 which set limits for CO2 emissions from cars and vans, and with
implementing legislation on monitoring and reporting of data (Commission Regulation
(EU) No 1014/2010 (cars) and Commission Implementing Regulation 2012/293/EU
(vans)).
3.2 What would happen without EU action?
EU fuel efficiency standards for new cars and vans have proven to be a strong driver for
innovation and efficiency in automotive technology. These targets allowed EU
manufacturers to have a first mover advantage and to increase exports globally. Without
further action in this field, it will be difficult for the EU automotive sector to retain its
leading role in global markets as developing innovation and cutting-edge technologies is
the only way to maintain and strengthen European competitiveness.
With all major markets with the exception of China and India projected to stall in the
future, it will be important for the EU to maintain or increase the share of high-quality
and high-technology vehicles on third markets, notably in those markets that are likely to
grow fast. (source GEAR 2030)
Besides, without further EU action in this field it is likely there would be little additional
substantial CO2 reduction from new light-duty vehicles. There may be certain
expectations that in view of the current CO2 requirements and expected regulatory action
in this field in third countries to which European vehicles are exported, the fuel
efficiency improvement of vehicles may continue somewhat beyond this rate. However,
as seen in the EU in the period between 1995 and 2006 for cars, in the absence of the
mandatory CO2 standard this progress is likely to be offset at least to some degree by the
increase in power, size or comfort of new cars.
Some reduction in emissions from the overall fleet of light-duty vehicles would still be
expected beyond 2021 due to the continuing renewal of the existing fleet with newer cars
and vans meeting the 2020/21 CO2 standards. However, transport activity would
continue to increase and the overall CO2 reductions would not be sufficient to reach the
targets set by the European Council in the 2030 Climate and Energy Package or
contribute sufficiently to the goals of the Paris Agreement.
3.3 Analysis of subsidiarity and added value of EU action
EU action is justified in view of both the cross-border impact of climate change and the
need to safeguard single markets in vehicles.
Without EU level action there would be a risk of a range of national schemes to reduce
light duty vehicle CO2 emissions. If this were to happen it would result in differing
ambition levels and design parameters which would require a range of technology
options and vehicle configurations, diminishing economies of scale.
Since manufacturers hold differing shares of the vehicle market in different Member
States they would therefore be differentially impacted by various national legislations
potentially causing competitive distortions. There is even a risk that national legislation
might be tailored to suit local industry.
This poor coordination of requirements between countries, even if all Member States
were to establish regulatory requirements for new vehicle CO2 emissions, would raise
compliance costs for manufacturers as well as weaken the incentive to design fuel
efficient cars and LCVs because of the fragmentation of the European market. It is
30
unlikely that Member States acting individually would set targets in an equally consistent
manner as shown by the widely differing tax treatment of new cars across the EU. This
means that greater benefits will be achieved for the same cost from coordinated EU
action than would be achieved from differing levels of Member State action.
With action only at Member State level we would not benefit from the lower costs which
would arise as a result of the economies of scale that an EU wide policy delivers. The EU
light vehicle market is currently around 16 million vehicles per year. The largest Member
State market is around 3 million vehicles per year. On their own, individual Member
States would represent too small a market to achieve the same level of results and
therefore an EU wide approach is needed to drive industry level changes.
The additional costs which would arise from the lack of common standards and common
technical solutions or vehicle configurations would be incurred by both component
suppliers and vehicle manufacturers. However, they ultimately would be passed on to
consumers who would face higher vehicle costs for the same level of greenhouse gas
reduction without coordinated EU action.
The automotive industry requires as much regulatory certainty as possible if it is to make
the large capital investments necessary to maximise the fuel economy of new vehicles,
and even more so for shifting to new primary energy sources. Standards provide this
certainty over a long planning horizon and they could not be implemented with the same
effectiveness and certainty at Member State level.
31
4 OBJECTIVES
General policy objective
The general policy objective is to contribute to the achievement of the EU's commitments
under the Paris Agreement (based on Article 192 TFEU) and to strengthen the
competitiveness of EU automotive industry.
Specific objectives
1. Contribute to the achievement of the EU's commitments under the Paris
Agreement by reducing CO2 emissions from cars and vans cost-effectively;
2. Reduce fuel consumption costs for consumers;
3. Strengthen the competitiveness of EU automotive industry and stimulate
employment.
These three specific objectives are on equal footing.
The first one concerns the climate objective of the Paris Agreement. Further efforts are
necessary for all Member States to meet their 2030 targets under the Effort Sharing
Regulation. With road transport causing one third of non-ETS emissions and emissions
increasing in the last few years, reducing CO2 emissions from cars and vans is of key
importance.
Implementing the Paris Agreement requires the decarbonisation of the economy
including of road transport. The Low-Emission Mobility Strategy has confirmed the
ambition of reducing GHG emissions from transport by at least 60% by 2050, as initially
set out in the 2011 Low-Carbon Economy Roadmap and Transport White Paper.
This cannot happen without a very high deployment of zero- and low-emission vehicles.
Analysis has shown that by 2050, electrically chargeable vehicles need to represent about
68-72% of all light duty vehicles on the roads. This requires a significantly increasing
uptake of zero- and low-emission vehicles already in 2030 as the new vehicles of 2030
will remain on the road until the mid-2040s.
The second specific objective is related to the consumer angle of the CO2 standards,
aiming to create benefits for car and van users through the sales of more efficient
vehicles.
The third specific objective relates to innovation, competitiveness (including fair
competition amongst EU manufacturers) and employment. While the EU automotive
sector has been very successful in advanced internal combustion engine vehicles world-
wide, it will need to adapt to the ongoing global transitions in the area of mobility and
transport in order to maintain its technological leadership.
By providing a clear regulatory signal and predictability for industry to develop and
invest in zero- and low-emission vehicles and fuel-efficient technologies, this initiative
aims to foster innovation and strengthen EU industry's competitiveness in a fast changing
global automotive landscape, without distorting the competition between EU
manufacturers.
In addition to the three abovementioned specific objectives, the revision of the CO2
standards for cars and vans are expected to lead to two main co-benefits: improvements
in air quality and increased energy security.
32
5 WHAT ARE THE VARIOUS OPTIONS TO ACHIEVE THE OBJECTIVES?
This Section describes the options identified to address the problems listed in Section 3
and to achieve the objectives defined in Section 4. It sets out the rationale for their
selection, as well as the reasons for discarding certain options upfront, taking into
account the evaluation study, the public consultation, additional stakeholder input; as
well as several internal and external study reports. The options cover a number of
elements, some of which are already part of the current Regulations. The options are
grouped into five categories:
(i) CO2 emission targets (level, timing, metric);
(ii) the distribution of effort amongst manufacturers;
(iii) incentives for low- and zero-emission vehicles;
(iv) elements for cost-effective implementation;
(v) governance related issues
The following tables show how the policy options, grouped into the five key policy areas,
relate to the problems and objectives
Table 2: Policy options and problems
Key policy areas Problem 1: Insufficient uptake of
the most efficient
vehicles, including low
and zero emission
vehicles, to meet Paris
Agreement
commitments and to
improve air quality,
notably in urban areas
Problem 2: Consumers miss out on
possible fuel savings
(market failures)
Problem 3: Risk of losing the EU's
competitive advantage
due to insufficient
innovation in low-
emission automotive
technologies over the
long term
Emission targets
Distribution of
effort
ZEV/ LEV
incentives
Elements for cost-
effective
implementation
Governance
33
Table 3: Policy options and objectives
Key policy areas PARIS
AGREEMENT:
Contribute to the
achievement of the
EU's commitments
under the Paris
Agreement Reduce by
reducing CO2
emissions from cars
and vans cost-
effectively
CONSUMERS:
Reduce fuel
consumption costs for
consumers
COMPETITIVENESS:
Strengthen the
competitiveness of EU
automotive industry and
stimulate employment
Emission targets
Distribution of
effort
ZEV/ LEV
incentives
Elements for
cost-effective
implementation
Governance
5.1 Emission targets (level, timing and metric)
The currently applicable Regulations (EC) No 443/2009 ("Cars Regulation") and (EU)
No 510/2011 ("Vans Regulation") set a fleet-wide target of 95 g CO2/km (from 2021,
with a phase-in from 2020) and 147 g CO2/km (from 2020), respectively, for the
emissions of newly registered vehicles. These targets are based on the NEDC test
procedure. Compared to the targets set previously, they represent an average annual
reduction of 5.1% for cars (from the 2015 target of 130 g CO2/km) and of 5.6% for vans
(from the 2017 target of 175 g CO2/km).
The introduction of the new test procedure WLTP, in September 201760
, is expected to
bring the tailpipe CO2 emissions from cars and vans determined during type approval
closer to the real world emissions. The WLTP will be fully applicable to all new cars and
vans from September 2019 (see also Section 5.5).
WLTP is likely to result in increased CO2 emissions for most vehicles but the increase
will not be evenly distributed between different manufacturers. Due to this non-linear
relationship between the CO2 emission test results from the NEDC and WLTP test-
procedures, it is impossible to determine one single factor to correlate NEDC into WLTP
CO2 emission values. A correlation procedure61
will therefore be performed at the level
of individual manufacturer. Based on the correlation procedures and the methodology
adopted for translating the individual manufacturer targets from NEDC to WLTP values,
60 Commission Regulation (EU) 2017/1151 of 1 June 2017 supplementing Regulation (EC) No 715/2007
61 Commission Implementing Regulation (EU) 2017/1153; Commission Implementing Regulation (EU)
2017/1152
34
WLTP-based manufacturer targets will apply from 2021 onwards. Those targets will be
confirmed by the Commission and published in October 2022.62
More information on the transition from NEDC to WLTP is given in Annex 5.
5.1.1 CO2 emission target level (TL)
The likely increase in WLTP CO2 emission values (compared to NEDC) has been taken
into account for the purposes of the analytical work underlying this impact assessment
(see Annex 4.6).
Since the exact specific WLTP emission target values for 2021 can only be determined in
2022 (as described above), the new emission targets should be defined not as absolute
values but in relative terms. The starting point for this are the 2021 EU-wide fleet
average WLTP emission targets (i.e. the weighted average of the manufacturers' specific
emissions targets for 2021). The new targets can be expressed either as a percentage
reduction of those 2021 EU-wide fleet targets or as an average annual reduction rate over
a given period.
The options in this section for the new EU-wide fleet average target levels ("TLC" for
cars and "TLV" for vans) are defining the target trajectory over the period 2021-2030,
without prejudging the target years. Options as regards the timing of the targets are set
out in Section 5.1.2.
5.1.1.1 CO2 target level for passenger cars (TLC)
Option TLC0: Change nothing (baseline)
This option represents the status quo, meaning that the CO2 target level set in the
current Regulation is maintained after 2021 (WLTP equivalent of 95 g CO2/km as
EU-wide fleet average).
The other options for defining the EU-wide fleet CO2 target level for passenger
cars are summarised in the below table.
Option Decrease of WLTP CO2
target level (2021-2030)
Average annual reduction rate of
WLTP CO2 target level (2021-2030)
TLC10 10% 1.2%
TLC20 20% 2.4%
TLC25 25% 3.2%
TLC30 30% 3.9%
TLC40 40% 5.5%
TLC_EP40 40% 5.5%
(8.0% for 2021-2025 and
3.5% for 2025-2030)
TLC_EP50 50% 7.4%
Option TLC_EP40 differs from option TLC40 by defining a non-linear target trajectory.
This covers the strictest end of the 2025 target range referred to in the Statement by the
62 Commission Delegated Regulation (EU) 2017/1502 of 2 June 2017 amending Annexes I and II to
Regulation (EC) No 443/2009, OJ L 221, 26.8.2017, p. 4 and Commission Delegated Regulation (EU)
2017/1499 of 2 June 2017 amending Annexes I and II to Regulation (EU) No 510/2011, OJ L 219,
25.8.2017, p. 1
35
Commission in 2014 in the context of the negotiations on the Cars Regulation63
. This
also holds true for option TLC_EP50, which defines a 2030 target that is 50% lower than
the 2021 target.
Figure 5: EU-wide fleet target level trajectories for new cars under the different
TLC options64
5.1.1.2 CO2 target level for vans (TLV)
Option TLV 0: Change nothing (baseline)
This option represents the status quo, meaning that the CO2 target level set in the
current Regulation is maintained after 2021 (WLTP equivalent of 147 g CO2/km
NEDC as EU-wide fleet average).
The other options for defining the EU-wide fleet CO2 target level for light
commercial vehicles are summarised in the below table.
Option Decrease of WLTP CO2 target
level (2021-2030)
Average annual reduction rate of
WLTP CO2 target level (2021-2030)
TLV10 10% 1.2%
TLV20 20% 2.4%
TLV25 25% 3.1%
TLV30 30% 3.9%
63 "In carrying out its impact assessment of a 2025 target the Commission will consider the appropriateness
of a range of ambition levels/rates of reduction, coherent with the long term climate goals of the EU
and the emission reduction trajectory referred to in recital 7 of Regulation (EU) No. xxx/2013. This
assessment will cover the range of ambition sought by the European Parliament for a 2025 target in the
range of 68g to 78g CO2/km, equivalent to 4-6% reduction per year in relation to the 2020 target."
(http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%206642%202014%20ADD%201%20REV%
201)
64 The figure shows the evolution over time, relative to the target of 95 g CO2/km NEDC, which applies in
2021 (100%). The future targets will be set in g CO2/km WLTP.
36
TLV40 40% 5.5%
TLV_EP40 36% 4.4%
(8.1% for 2021-2025 and
2.2% for 2025-2030)
TLV_EP50 50% 7.4%
(8.1% for 2021-2025 and
6.9% for 2025-2030)
Options TLV_EP40 and TLV_EP50 are defining a non-linear target trajectory, covering
the strictest end of the 2025 target range referred to in the Statement by the Commission
in 2014 in the context of the negotiations on the Vans Regulation65
. For 2025, both
options cover a WLTP target equivalent to 105 g CO2/km NEDC, while in 2030 the
targets are 36%, respectively 50%, lower than the 2021 targets.
Figure 6: EU-wide fleet target level trajectories for new vans under the different
TLV options66
5.1.2 Timing of the CO2 targets (TT)
The following options will be considered for defining the year(s) for which new targets
are set. These options apply both for passenger cars (in relation to options TLC) and for
light commercial vehicles (in relation to options TLV).
65 "In carrying out its impact assessment of a 2025 target, the Commission will consider the
appropriateness of a range of ambition levels/rates of reduction, coherent with the long term climate
goals of the EU and the necessary emission reduction trajectory. This assessment will cover the range
of ambition sought by the European Parliament for a 2025 target in the range of 105 g to 120 g
CO2/km, equivalent to 3-4 % reduction per year in relation to the average 2012 emissions from new
light commercial vehicles."
(http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%205584%202014%20ADD%201) The
average 2012 emissions from new light commercial vehicles were 180 g CO2/km.
66 The figure shows the evolution over time, relative to the target of 147 gCO2/km NEDC which applies in
2020-2021 (100%). The future targets will be set in g CO2/km WLTP.
37
Option TT 1: The new EU-wide fleet CO2 targets start to apply in 2030.
This means that the (WLTP equivalent of the) CO2 target levels set in the Cars
and Vans Regulations would continue to apply until the year 2029.
Option TT 2: New EU-wide fleet CO2 targets start to apply in 2025 and will
continue to apply until 2029, and stricter EU-wide fleet CO2 targets start to apply
from 2030 on.
Under this option, the new EU-wide fleet targets for 2025 and 2030 are calculated
according to the annual average reduction rates set out in Section 5.1.1.
Option TT 3: New EU-wide fleet CO2 targets are defined for each of the years
2022-2030.
Under this option, new annual EU-wide fleet CO2 targets are calculated according
to the annual average reduction rates set out in Section 5.1.1
These options include a mid-term review to assess the effectiveness of the policy.
5.1.3 Metric for expressing the targets
The CO2 targets set in the Cars and Vans Regulations relate to the tailpipe emissions of
newly registered vehicles, applying the so-called Tank-to-Wheel approach (TTW). The
targets are expressed in g CO2 /km and apply for the sales-weighted average emissions of
the EU-wide fleet. For calculating the average, each newly registered vehicle is counted
equally.
Using a TTW metric allows focusing on vehicle efficiency, which has proven to be an
effective way of triggering the uptake of vehicle technology and starting a shift towards
alternative powertrains. However, the overall GHG emission impact of using (new)
vehicles is also affected by the type of fuel/energy used to propel the vehicle, as different
energy types differ in the amount of CO2 emissions generated during their production,
the so-called Well-To-Tank (WTT) emissions. The sum of the TTW emissions and the
WTT emissions is referred to as the Well-To-Wheels (WTW) emissions.
Furthermore, there are also CO2 emissions associated with vehicle manufacturing
(including the mining, processing and manufacturing of materials and components),
maintenance and disposal. These are referred to as "embedded" CO2 emissions. For
determining those emissions, information is needed concerning the different phases of a
vehicle's life cycle and tools such as life-cycle assessment (LCA) are often used for this
purpose.
The g CO2/km metric allows comparing the emission performance of vehicles on a unit
distance basis, but this does not reflect the total emissions of a vehicle over its lifetime.
Vehicles with a higher lifetime mileage may contribute more to total CO2 emissions
compared to vehicles that are used less intensively, even where the latter perform worse
against the g CO2/km targets.
The evaluation study noted that the effectiveness of the Cars and Vans Regulations might
have been reduced because some of the emission reductions achieved in terms of tailpipe
CO2 emissions may have been accompanied by increased emissions elsewhere.
During the public consultation, some stakeholders also suggested to switch to other
metric types to express the targets, in particular by using one of the approaches
mentioned hereafter.
Well-to-Wheel (WTW) based metric
38
In the public consultation, stakeholders representing the fuels industry as well as some
component suppliers suggested a change from the TTW metric to a WTW based metric,
which takes into consideration the sum of the TTW and WTT emissions in the CO2 target
levels. By contrast, consumer organisations, car manufacturers and stakeholders from the
power sector did not support such a change. Public authorities had mixed views.
Metric taking into account embedded emissions
In the public consultation, most car manufacturers were against changing to this
approach, whereas other stakeholder groups had diverging views.
Metric based on mileage weighting
During the public consultation, the question whether average mileage by fuel and vehicle
segment should be taken into account when establishing targets received very mixed
replies from stakeholders. A number of environmental and transport NGOs, some
research institutions, and all respondents from the petroleum sector were in favour of
doing so. By contrast, one NGO and the majority of car manufacturers were against this
option. Most consumer organisations were neutral on the issue, whereas public
authorities expressed split views.
In the light of the above and the views expressed during the public consultation, the
following options will be considered for defining the metric of the EU-wide fleet CO2
targets. These options apply both for passenger cars and for light commercial vehicles.
Option TM_TTW: change nothing, TTW approach
This option maintains the current metric for setting the targets, i.e. targets
expressed in g CO2/km based on a TTW approach and applying for the sales-
weighted average EU-wide fleet emissions.
Option TM_WTW: WTW approach
Under this option, the target would be expressed in g CO2/km based on a
WTW approach and would apply for the sales-weighted average EU-wide
fleet emissions.
Option TM_EMB: metric covering embedded emissions
Under this option, the target would be expressed in g CO2/km covering both
WTW and embedded emissions and it would apply for the sales-weighted
average EU-wide fleet emissions.
Option TM_MIL: metric based on mileage weighting
Under this option, the target would be set in relation to the mileage-weighted
average EU-wide fleet emissions. It could either be expressed in g CO2/km or
in different units reflecting the difference in lifetime mileage between vehicle
groups.
5.2 Distribution of effort (DOE)
The Cars and Vans Regulations use a limit value line to define the specific emission
targets for individual manufacturers, starting from the EU-wide fleet targets. This linear
curve defines the relation between the CO2 emissions and a "utility parameter"
(currently: vehicle mass in running order67
).
67 This is defined as "mass of the vehicle, with its fuel tank(s) filled to at least 90 % of its or their
capacity/ies, including the mass of the driver, of the fuel and liquids, fitted with the standard
39
On this line, the EU-wide fleet target value corresponds with the average mass of the new
vehicles in the fleet (M0). The slope of the line is the key factor in distributing the EU-
wide fleet target as it determines to what extent vehicles (manufacturers) with a
higher/lower (average) mass will be allowed/required to have higher/lower CO2
emissions than the EU-wide fleet average. The steeper the slope, the larger the difference
in specific emission targets between manufacturers with "heavy" and "light" vehicles.
In order to avoid that the EU-wide fleet targets would be altered due to an autonomous
change in the average mass of the fleet, the M0 values are readjusted every three years to
align them with the average mass of the new fleet of the previous years.
The choice of slope of the limit value line is merely a decision on how to share efforts
amongst manufacturers and does not affect the overall emission target for the EU fleet of
new vehicles.
Other approaches (e.g. using another or no utility parameter, changing the slope of the
line, using a non-linear curve) are possible for distributing the effort required from each
manufacturer in meeting the EU-wide fleet target. The Cars and Vans Regulations
explicitly request the Commission to review this modality68
.
Most car manufacturers and consumer organisations responding to the online
consultation were in favour of using a utility parameter to distribute the effort between
different manufacturers. A relatively large number of stakeholders across different
stakeholder groups were neutral on this question, and only a small number of
stakeholders (from different groups) were against the use of a utility parameter. Views
diverged on which utility parameter to use. All consumer organisations, some
environmental and transport NGOs as well as stakeholders from the petroleum sector
supported footprint69
, while most car manufacturers supported mass as utility parameter.
Only two stakeholders referred explicitly to another parameter (loading capacity, in the
case of light commercial vehicles).
The Association of European automobile manufacturers suggested a slightly different
approach for cars and vans. While maintaining a single linear curve for cars with a mass-
based utility parameter (i.c. WLTP test mass70
), for vans they proposed to switch to a
curve consisting of two linear parts with different slopes, arguing that this would better
take account of the large variety in design of light commercial vehicles.
equipment in accordance with the manufacturer’s specifications and, when they are fitted, the mass of
the bodywork, the cabin, the coupling and the spare wheel(s) as well as the tools" (Article 2(4)) of
Commission Regulation (EU) No 1230/2012 of 12 December 2012 implementing Regulation (EC) No
661/2009 of the European Parliament and of the Council with regard to type-approval requirements for
masses and dimensions of motor vehicles and their trailers and amending Directive 2007/46/EC of the
European Parliament and of the Council)
68 In particular, the Commission is requested to review whether "a utility parameter is still needed and
whether mass or footprint is the more sustainable utility parameter, in order to establish the CO2
emissions targets for new passenger cars for the period beyond 2020."
69 In this context, the "footprint" of a vehicle is defined as the product of its wheelbase and track width,
measured in m².
70 The WLTP test mass includes the mass in running order as well as the mass of optional equipment fitted
to individual vehicles and the vehicle. By contrast, NEDC tests are based on the reference mass. The
WLTP test mass is expected to better reflect the actual mass of the vehicles put on the road. While the
test mass is not yet monitored or reported, this will be the case once the WLTP is being implemented
(from 2018 onwards). See also TNO (2016): NEDC – WLTP comparative testing, TNO 2016 R11285,
http://publications.tno.nl/publication/34622355/ZCzWY2/TNO-2016-R11285.pdf
40
In view of this, the following options are being considered:
Option DOE 0: Change nothing
Under this option the linear limit value curves as defined in the current Regulations
are maintained. The utility parameter applied is the mass in running order and the
slope of the curves is 0.0333 (cars) and 0.096 (vans). The adjustment of the M0 value
takes place every three years.
Option DOE 1: mass based limit value curve with a slope representing an equal
reduction effort for all manufacturers
Under this option, the manufacturer specific emission targets would be derived from
the EU-wide fleet target according to a limit value line with the mass of the vehicles
as the utility parameter.
The slope of the limit value line would be determined so that it results in an equal
reduction effort for all manufacturers – starting from 2021 - according to the given
utility value71
. Two variants will also be considered as part of the assessment, one
using the WLTP test mass as utility parameter (instead of mass in running order) and
one using a combination of two different slopes for vans (taking account of the
vehicle characteristics within the lighter and heavier segments).
Option DOE 2: footprint based limit value curve with a slope representing an
equal reduction effort for all manufacturers
Under this option, the specific emission targets would be derived from the EU-wide
fleet target according to a limit value line using the vehicle footprint (i.e. wheelbase
multiplied by track width) as the utility parameter. The approach for defining the
slope would be the same as under option DOE 1, but using footprint data instead of
mass data.
For options DOE 1 and DOE 2, other sub-options (with different slopes) had initially
been considered, but were not withheld as they would either lead to unwanted effects
(in case of higher slopes) or are very close to the other options explored (esp. DOE 4
in case of lower slope).
Option DOE 3: same target for all manufacturers ("uniform target")
Under this option, the EU-wide fleet target would apply for each individual
manufacturer and no utility parameter would be applied72
. As the specific emission
targets under the current Regulations vary according to the average mass of the new
vehicles registered by a manufacturer, the (percentage) emission reductions required
to meet the future targets would be larger for manufacturers having a higher average
vehicle mass than for those having lighter vehicles.
Option DOE 4: equal reduction percentage for all manufacturers
71 The limit value line is constructed by firstly plotting the (WLTP equivalent of the) CO2 emission values
for the reference year for all vehicles registered in that year as a function of their mass. The slope of
the line representing the sales-weighted least squares fit of the plotted points is the "reference slope".
For a given target year, the ratio between the average EU-wide fleet emissions in the reference year
and the EU-wide fleet target level in that year is determined. Multiplying the reference slope by that
ratio gives the slope of the new limit value curve for the given year and target level. This line reflects
an equal reduction effort for all manufacturers according to the given utility value.
72 Another way of looking at this is that the slope of the limit value function becomes zero (flat limit value
curve).
41
As in option DOE 3, no utility parameter would apply in this case. The same
emission reduction percentage would be required for each manufacturer, taking its
specific emissions target in 2021 as the starting point. Therefore, the future specific
emission targets (in g/km) would differ amongst manufacturers, depending on their
2021 WLTP target73
.
Under options DOE 3 and DOE 4, the future manufacturer specific emissions targets
would not be affected by future changes in the average value of the utility parameter for
that manufacturer's new vehicles (mass or footprint).
5.3 ZEV/ LEV incentives
5.3.1 Context
The transition to low- and zero-emission mobility is subject to a number of policy
discussions. At the informal meeting of the Environment and Transport Ministers in
Amsterdam in April 2016, Member States supported this transition and underlined the
opportunities it creates74
.
The May 2017 Communication, 'Europe on the Move: An agenda for a socially fair
transition towards clean, competitive and connected mobility for all'75
confirms that EU-
wide carbon dioxide emissions standards are a strong driver for innovation and efficiency
and will contribute to strengthening competitiveness and pave the way for zero and low-
emission vehicles in a technology-neutral way. It also stated that options under review
include specific targets for low and/or zero-emission vehicles.
The Communication builds on the earlier Commission's European Strategy for Low-
Emission mobility76
, published in July 2016, in which the Commission highlighted the
important role of zero- and low-emission vehicles in delivering CO2 reductions,
particularly in view of the longer-term decarbonisation objectives. Furthermore, the
Commission stressed that accelerating the ongoing shift to low-emission mobility will
offer major opportunities for the European automotive and other sectors to drive global
standards and export their products. Fostering a domestic lead market for such vehicles is
relevant from a competitive perspective, in order to create (1) economies of scale to drive
down costs and (2) a competitive edge for European manufacturers and component
suppliers.
The battery is a major cost component of a BEV with battery costs making up to 55% in
the price of a mass manufactured BEV in 201677
. According to external studies, a broad
range of EV support policies applied worldwide78
is expected to contribute to a drastic
73 Those WLTP targets will be derived from the NEDC targets, which will differ between manufacturers
according to the limit value curves defined in the current Regulations (Commission Delegated
Regulations (EU) 2017/1502 and (EU) 2017/1499).
74 Informal meeting of the Environment and Transport Ministers, 14-15 April 2016 – Information note of
the Presidency (http://data.consilium.europa.eu/doc/document/ST-10203-2016-INIT/en/pdf)
75 COM(2017) 283 final
76 https://ec.europa.eu/transparency/regdoc/rep/1/2016/EN/1-2016-501-EN-F1-1.PDF
77 N. Soulopoulos, (2017) When Will Electric Vehicles be Cheaper than Conventional Vehicles?
(Bloomberg New Energy Finance) -
https://data.bloomberglp.com/bnef/sites/14/2017/06/BNEF_2017_04_12_EV-Price-Parity-Report.pdf
78 OECD/IEA (2017) Global EV Outlook 2017
(https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf)
42
reduction in cost of electric vehicles over the next decade as battery manufacturing gets
cheaper79
. Those cost reductions are however highly reliant on mass manufacturing.
Analysts argue that policy is therefore critical in this respect and fuel economy
regulations will play an important role in driving the scale-up in EV manufacturing over
the next 5-7 years80
.
Figure 7 summarises information available up to 2016 on the costs and volumetric
energy densities of batteries currently being researched, as well as the ranges of cost
reductions that can be expected from the three main families of battery technologies:
conventional lithium ion; advanced lithium ion, using an intermetallic anode (i.e. silicon
alloy-composite); and technologies going beyond lithium ion (lithium metal, including
lithium sulphur and lithium air)81
. Figure 8 illustrates the evolution of Li-ion battery costs
(in USD/kWh) in the past decade (showing a decrease of around 70% since 2010) and a
forecast of their further evolution towards 2030, based on expected demand82, 83
.
Figure 7: Battery costs (USD/kWh) and battery energy density (Wh/L)
Source: OECD/IEA (2017) Global EV Outlook 2017
79 ICCT project that 2015 and 2030 PHEVs will achieve about a 50% cost reduction, BEVs 60% and
FCEVs 70% ('Electric Vehicles: Literature review of technology costs and carbon emissions', 2016,
http://www.theicct.org/lit-review-ev-tech-costs-co2-emissions-2016).
Bloomberg estimates that battery costs are reducing by 19% per cumulative doubling of manufactured
capacity, which means that battery cell prices could more than halve between 2015 and 2025. (When
Will Electric Vehicles be Cheaper than Conventional Vehicles? (N. Soulopoulos, Bloomberg New
Energy Finance, 2017) https://data.bloomberglp.com/bnef/sites/14/2017/06/BNEF_2017_04_12_EV-
Price-Parity-Report.pdf
80 N. Soulopoulos, (2017) When Will Electric Vehicles be Cheaper than Conventional Vehicles?
(Bloomberg New Energy Finance)
81 OECD/IEA (2017) Global EV Outlook 2017
82 Bloomberg New Energy Finance (2017) (presentation by Michael Liebreich at the Bloomberg New
Energy Finance Global Summit, New York, April 2017) (https://about.bnef.com/blog/liebreich-state-
industry-keynote-bnef-global-summit-2017/)
83 Bloomberg New Energy Finance (2017): "Global Trends in Clean Energy and Electric Mobility"
(presentation by Michael Liebreich, Berlin, 10 May 2017) (https://www.agora-
energiewende.de/fileadmin/Projekte/2017/VAs_sonstige/Clean_Energy_Electric_Mobility/Liebreich_
Global_Trends_Event_10052017.pdf )
43
Figure 8: Evolution of Li-ion battery costs (USD/kWh)
Source: Bloomberg New Energy Finance (2017)
In addition, the narrowing cost gap between electric cars and ICEV may put pressure on
governments to gradually revise their support measures, phasing out incentives in cases
where BEVs and PHEVs actually rival ICEV costs. According to a report by OECD/IEA,
other regulatory instruments (such as including fuel economy regulations and local
measures, such as differentiated access to urban areas) will remain important in
supporting the electric car uptake needed to meet the targets characterising a low-
emission future84
.
Regulatory incentives might thus be needed to help overcome the barriers to the market
uptake of ZEVs and LEVs.
The vehicles incentivised should have a significant potential contribution to reducing the
CO2 emissions of the new car and van fleet. The types of vehicle most relevant in this
respect are the following:
Battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV), both
having zero tailpipe CO2 emissions and a limited market uptake so far.
Plug-in hybrid electric vehicles (PHEV) with sufficiently low tailpipe CO2
emissions.
In their replies to the public consultation, a majority of stakeholders across all
stakeholder groups was in favour of some mechanism to encourage the deployment of
LEV/ZEV, except for consumer organisations which were mostly neutral on whether and
how LEVs/ZEVs should be incentivised. Environmental and transport NGOs were
mostly in favour of a flexible mandate, differentiating between LEV and ZEV and
allowing trading among manufacturers. European car manufacturers argued for
considering broader policy issues such as grid management, infrastructure and taxation
policy.
84 Global EV Outlook 2017 (OECD/IEA, 2017)
(https://www.iea.org/publications/freepublications/publication/global-ev-outlook-2017.html
44
The European Automobile Manufacturers Association (ACEA) is opposed to sales
mandates for LEV/ZEV as it considers the market uptake to be mainly driven by public
incentives, in particular fiscal measures, which would give car manufacturers limited
control to meet such mandates.85
They also refer to experience in markets with existing
mandates where customers are not willing to buy LEV/ZEV. Car manufacturers also
point to the need to increase the number of publically available charging points which
does not fall under their responsibility.
At the same time, over the past few years, several major car manufacturers have been
announcing their global ambitions for the sales of electric cars, which would result in a
strongly increasing deployment of those vehicles in the following years. Table 4
summarises a number of those announcements.
Table 4: List of manufacturer's announcements on electric car ambition (adapted
from 'Global EV outlook 2017' (OECD/IEA, 2017)86
)
Manfacturer Announcement
BMW 0.1 million electric car sales in 2017 and 15-25% of the BMW
group’s sales by 202587
Chevrolet (GM) 30 thousand annual electric car sales by 2017
Chinese
manufacturers*
4.52 million annual electric car sales by 2020 equivalent to around
20% of total expected production and sales in China.
Daimler 0.1 million annual electric car sales by 2020; 15-25% of total sales
(Mercedes and Smart) with electric powertrain by 202588
Ford 13 new EV models by 2020
Honda 66% of the 2030 sales to be electrified vehicles (including hybrids,
PHEVs, BEVs and FCEVs)
Renault-Nissan 1.5 million cumulative sales of electric cars by 2020; aspirational
target of more than 20% of total sales to be equpped with electric
powertrain by 202289
Tesla 0.5 million annual electric car sales by 2018
1 million annual electric car sales by 2020
Volkswagen 2-3 million annual electric car sales by 2025; 20-25% of VW Group's
global sales to be "battery electric vehicles" by 202590
Volvo 1 million cumulative electric car sales by 2025
all new models will have an electric motor, including fully electric
85 ACEA (2017) Decarbonisation of transport – impact on jobs, stakeholder meeting, Brussels, 26 June
2017
86 OECD/IEA (2017), 'Global EV outlook 2017' (Table 2)
87 https://www.press.bmwgroup.com/global/article/detail/T0273122EN/bmw-group-announces-next-step-
in-electrification-strategy?language=en
88 http://www.manager-magazin.de/unternehmen/autoindustrie/daimler-mehr-als-eine-milliarde-euro-pro-
jahr-fuer-elektroautos-a-1117695.html
89 http://www.france24.com/en/20170915-renault-nissan-launch-12-zero-emission-models 90 https://www.volkswagen-media-services.com/en/detailpage/-/detail/New-Group-strategy-adopted-
Volkswagen-Group-to-become-a-world-leading-provider-of-sustainable-
mobility/view/3681833/7a5bbec13158edd433c6630f5ac445da
45
cars, plug-in hybrids and mild hybrids from 201991
*Note: Chinese manufacturers include BYD, BJEV-BAIC Changzhou factory, BJEV-BAIC Qingdao factory, JAC
Motors, SAIC Motor, Great Wall Motor, GEELY Auto Yiwu factory, GEELY Auto Hangzhou factory, GEELY Auto
Nanchong factory, Chery New Energy, Changan Automobile, GAC Group, Jiangling Motors, Lifan Auto, MIN AN
Auto, Wanxiang Group, YUDO Auto, Chongqing Sokon Industrial Group, ZTE, National Electric Vehicle, LeSEE,
NextEV, Chehejia, SINGULATO Motors, Ai Chi Yi Wei and WM Motor.
Despite this willingness by manufacturers to strongly expand their offer of EVs, the
IEA92
argues that at this stage of the electric car market deployment, policy support
remains "indispensable for lowering barriers to adoption". In this context the IEA notes
that mandates in combination with targets provide a clear signal to manufacturers and
customers.
As a follow-up to the EMIS Inquiry Committee, the European Parliament93
in April 2017
called on the Commission to fully engage in and implement a low-emission mobility
strategy and "to come forward with a draft regulation on CO2 standards for the car fleets
coming onto the market from 2025 onwards, with the inclusion of Zero-Emission
Vehicles (ZEV) and Ultra-Low Emission Vehicles (ULEV) mandates that impose a
stepwise increasing share of zero- and ultra-low-emission vehicles in the total fleet with
the aim of phasing out new CO2-emitting cars by 2035".
A regulatory instrument to enhance the uptake of LEV has been established since the
early 1990s in California with the "ZEV Regulation", which requires manufacturers to
market a certain percent of vehicles with (near-)zero tailpipe emissions (see Box 2)94
.
Similar mandates also apply in nine other States of the US95
. In September 2017, China
adopted new energy vehicle (NEV) mandates (see Box 3) for the sales of electric cars,
which, combined with government and local incentives for customers, manufacturers and
the development of infrastructure, have seen a very strong growth in the past few years.
Most recently, Quebec has adopted a ZEV mandate96
. In the light of this policy context,
the Impact Assessment is considering several options described below.
Box 2: California's ZEV programme97
California introduced a ZEV mandate already in 1990. It required manufacturers to progressively
increase the sales volume of BEVs to 2% of new vehicle sales by 1998 and 10% by 2003. Given
the early stage of development of electric vehicles at the time, the initial ZEV mandate turned out
91 Volvo Car Group (2017): Volvo Cars to go all electric, (https://www.media.volvocars.com/global/en-
gb/media/pressreleases/210058/volvo-cars-to-go-all-electric)
92 OECD/IEA (2017), 'Global EV outlook 2017'
93 European Parliament Recommendation of 4 April 2017 to the Council and the Commission following the
inquiry into emission measurements in the automotive sector
(http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P8-TA-2017-
0100+0+DOC+PDF+V0//EN)
94 https://www.arb.ca.gov/msprog/zevprog/zevprog.htm
95 Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and
Vermont.
96 The mandated new ZEV market shares, which are modelled after California’s approach, are 3.4% in
2018, 6.9% in 2020 and 15.5% in 2025.
97 https://www.arb.ca.gov/msprog/zevprog/zevprog.htm
46
to be too ambitious and was subject to a number of modifications since then.98 The current ZEV
Regulation requires vehicle manufacturers with an annual production of more than 4,500 vehicles
to bring to and operate in California a certain percent of "ZEVs" (i.e. BEV, FCEV and PHEV;
up to 2017, ZEV credits may also be obtained for "partial" ZEV (PZEV), such as clean hybrids
and clean gasoline vehicles) . The ZEV Regulation has become incrementally more stringent and
will continue to do so until 2025. From 2018 they include a minimum ZEV floor requirement for
large manufacturers (i.e. annual production of more than 60,000 vehicles) above which
manufacturers may use credits to meet their total ZEV requirement.
The Californian "ZEV" standards have in the meantime been adopted by nine other States in the
U.S. (29% of all new cars sold in the U.S. are sold in these 10 States).99 However, in 2016 the
actual share of BEV, PHEV and FCEV in new car sales was only around 3% in California and
less than 1% in the U.S. as a whole.100 In its recent Midterm Review CARB notes that costs for
batteries (as well as other component costs) have fallen "dramatically" (largely due to reduced
material costs, manufacturing improvements, and higher manufacturing volumes). Moreover, the
number of PHEV and BEV models offered on the market is expected to increase from 25 today
to more than 70 models over the next 5 model years. Since 2012 car manufacturers had been
over-complying with the ZEV standards and accumulated ZEV credits in view of meeting future
ZEV requirements.
Box 3: China's NEV mandate
In 2010 China introduced its new energy vehicle (NEV) programme setting a target of 1 million
electric vehicles (including both light- and heavy-duty vehicles) by 2015. With the support of
public incentives, sales of electric vehicles grew significantly in China in recent years with
cumulative sales reaching nearly 1 million in 2016101. On 28 September 2017, the Chinese
Ministry of Industry and Information Technology (MIIT) published the final rule on passenger
car fuel economy standards with an integrated mandate for NEVs which covers battery electric
(BEV), plug-in hybrid (PHEV) and fuel cell vehicles (FCEV).102
The legislation sets mandatory NEV requirements as from 2019: 10% in 2019 and 12% in 2020;
requirements for 2021 and beyond are yet to be determined by MIIT. The requirements are
applicable to all manufacturers with annual production or import volume of 30,000 or more
conventional-fuelled passenger cars. In order to meet the requirements, manufacturers can
generate new energy vehicle scores by producing or importing NEVs. A company’s actual
NEV score is calculated by summing up the products of annual manufacturing or import volume
of each NEV and the per-vehicle NEV score. The per-vehicle score depends mainly on the
electric range for BEV, whereas for PHEV and FCEV other factors are taken into account such as
electric consumption. The highest score of 5 can be reached by BEV, whereas PHEV can reach a
maximum score of 2. NEV requirements are therefore not equivalent to the market share of
NEVs in China in 2019 and 2020. For instance, e.g. for meeting 10% NEV requirement in 2019
98 Vergis, S. and Mehta, V. (2012): Technology innovation and policy: a case study of the California ZEV
mandate, in: Nillsson, M., Hillman, K., Ricken, A., Magnusson, T.: Paving the road to sustainable
transport: governance and innovation in low-carbon vehicles. Abingdon: Routledge
99 CARB (2017): California’s Advanced Clean Cars Midterm Review - Summary Report for the Technical
Analysis of the Light Duty Vehicle Standards,
https://www.arb.ca.gov/msprog/acc/mtr/acc_mtr_summaryreport.pdf
100 Reuters (2017): Zero-emission vehicle sales in the U.S.,
http://fingfx.thomsonreuters.com/gfx/rngs/california-electriccars/010021FJ3JD/index.html
101 EIU (2017): China's new NEV rules, http://www.eiu.com/industry/article/1185390902/chinas-new-nev-
rules/2017-05-03
102 http://www.miit.gov.cn/n1146295/n1146557/n1146624/c5824932/content.html
47
with BEVs only, a manufacturer would need a BEV share of 2% only. A company
generates NEV credits if its actual NEV score is higher than its NEV requirement. It will face
a NEV score deficit if its actual NEV score is below the target. If a manufacturer cannot reach its
NEV target in 2019, it can still meet its NEV requirement in 2020. A positive NEV quota can be
traded between manufacturers but cannot be carried over to following year(s) after 2019, except
from 2019 to 2020. Manufacturers are allowed to use NEV credits towards compliance with
existing fuel economy standards.
5.3.2 Policy options
Option LEV 0: Change nothing
This option assumes that, apart from the fleet-wide CO2 emission targets, the
legislation will not include provisions, which would specifically aim to increase the
number of ZEV or LEV registered. The assessment of this option will therefore be
based on the assessment of the TLC and TLV options
For the other policy options for incentivising ZEV/LEV, three key elements are
considered: (i) the definition of a low-emission vehicle, as this determines the scope of
the incentive, and (ii) the type of incentive and (iii) the level of the LEV incentive.
In addition, elements related to the implementation of the incentive need to be
considered, such as compliance assessment (incl. the link with the CO2 target),
differentiation between OEMs and between different types of LEV.
5.3.2.1 LEV definition (LEVD)
In order to identify which vehicles would qualify for the LEV incentive, it is necessary to
define what constitutes a LEV. This requires consideration of the metric and threshold to
be used.
An option initially considered was to use the zero emission range of a vehicle (in km) for
defining a LEV. However, this approach was not considered further, as the link of this
metric with CO2 emissions is less outspoken, and only limited data is available to decide
on an appropriate WLTP value. This view is also supported by the majority of
stakeholders from different stakeholder groups which clearly preferred the use of CO2
emission performance as the criterion for defining LEV, with proposed thresholds
ranging from 15g CO2/km to 50g CO2/km.
Therefore, as regards the CO2 emission threshold, only the options for defining a LEV
according to its tailpipe CO2 emissions will be further considered, as summarised in
Table 5.
Table 5: Options considered for the LEV definition (LEVD)
Option LEV definition
LEVD_ZEV only vehicles with CO2 emissions of zero qualify as a LEV
(LEV = ZEV)
LEVD_25 (for cars)
LEVD_40 (for vans)
LEV are all vehicles with CO2 emissions of less than or
equal to 25 g CO2/km (for cars) or 40 g CO2/km (for vans)
LEVD_50 LEV are all vehicles with CO2 emissions of less than 50 g
CO2/km (with counting of LEV on the basis of their CO2
emissions)
48
The higher threshold for vans under option LEVD_40 compared to cars (LEVD_25), is
explained by their larger average mass compared to cars and by the uncertainty over the
feasibility of bringing a sufficient number of PHEV vans with emissions below 25 g
CO2/km to the market.
For option LEVD_50, the 50 g CO2/km threshold is the same one as set in Article 5 of
the Cars and Vans Regulations for vehicles to be eligible for generating super-credits.
With the change from NEDC to WLTP, type approval emissions from PHEV with
emissions around 50 g CO2/km are not expected to change significantly (see Annex 4.6).
However, covering such a broad range of vehicles without any further distinction would
not take account of the expected improvement in battery efficiency and the
corresponding decrease of CO2 emissions from PHEV. Furthermore, the actual
performance of PHEV on the road is strongly influenced by the type and duration of trips
undertaken, external conditions (temperature) and consumer behaviour (charging, use of
electric equipment).
Therefore, a distinction is proposed under this option between ZEV and other LEV, by
counting each LEV in relation to its CO2 emissions. While each ZEV would thus count
as one vehicle, all other LEV would count as less than one vehicle, according to the
following formula: 1 −CO2 emissions of the LEV
50.
In this way, the incentive is targeted towards vehicles having near-zero emissions, which
avoids over-incentivising PHEVs with a short electric range.
5.3.2.2 Type and level of incentive (LEVT)
Additional regulatory tools for incentivising the uptake of ZEV/LEV currently used are
mostly based on a ZEV/LEV sales mandate (e.g. California) and/or a crediting system,
through increasing the weighting of a ZEV/LEV in the calculation of average emissions
or providing emission credits based on the sales share of qualified vehicles.
Under the current Cars and Vans Regulations, a "super-credit" modality has been
established to incentivise manufacturers to produce vehicles emitting less than 50 g
CO2/km. During a limited number of years, such vehicles may be counted as more than
one vehicle for the purpose of calculating the average specific emissions of a
manufacturer.
For cars, super-credits applied between 2012 and 2015 in relation to the 130 g CO2/km
target and will again apply (with lower multipliers) between 2020 and 2022 in relation to
the 95 g CO2/km target (with a cap of 7.5 g CO2/km per manufacturer over the three
years). For vans, super-credits only apply between 2014 and 2017 in relation to the 175
g/km target (for a maximum of 25,000 vans over that period).
However, as already highlighted in the impact assessment underlying the 2012 proposals
for amending the Cars and Vans Regulations103
, a super-credit system has significant
drawbacks as it reduces the stringency of the CO2 target and thus the effectiveness of the
Regulations in reducing CO2 emissions. The increase of CO2 emissions depends inter
alia on the multiplier used and the number of eligible vehicles. For example, with a
multiplier of 3.5 (which was applicable in the Cars Regulation in 2012-2013 and in the
Vans Regulation in 2014-2015), CO2 emissions could increase by 3% to 15% depending
on the proportion of vehicles qualifying for super-credits.
103 SWD (2012)213final
49
The evaluation study confirmed that super-credits could potentially weaken the targets,
but noted that this had not yet materialised (in 2015) in view of the very low uptake of
vehicles emitting less than 50 g CO2/km and as all major manufacturers were meeting
their targets at that time even without taking super-credits into account.
However, as the share of vehicles with low emissions is expected to increase over time,
maintaining the super-credit modality, as included in the Cars and Vans Regulations,
would bear a high risk of weakening the CO2 target.
This analysis is confirmed in recent studies104,105
which highlight the substantial
environmental cost of electric vehicle multipliers or super-credits, in particular as the
share of low-emission vehicles in the fleet starts to increase. Super-credits are seen as a
counterproductive long-term vehicle policy. As an example, it is calculated that with an
electric vehicle penetration at 28% of new vehicle sales in Europe, the regulation would
lose 41% of its intended CO2 benefits when allowing super credits. Furthermore, as CO2
targets get stricter, super-credits could even discourage the further deployment of LEVs
after 2020 due to the multiple counting. Maintaining even a small multiplier of 1.33 (the
lowest value used in the current Cars Regulation) could cause the market uptake of LEV
to be reduced by 6-7% by 2030.
Finally, by applying a multiplier from the first LEV registered on, the current super-
credits system fails to send a clear signal to manufacturers and authorities about the
expected share of LEV in the fleet.
The main drawbacks of the super-credit system could be mitigated or overcome by
redesigning it into a crediting system, which would incentivise the uptake of LEV
beyond a given level and would avoid undermining the CO2 target levels.
In view of the above, the following three options are considered:
Option LEVT_MAND: LEV mandate
Under this option, each manufacturer's new vehicle fleet would have to include at
least a given share of LEV.
Option LEVT_CRED1: LEV crediting system with one-way adjustment of the
CO2 target
This option builds on and improves the current super-credits system. The LEV
incentive would take the form of a crediting system in connection with a
manufacturer's specific CO2 target. A benchmark would be defined for the share
of LEV in the new fleet in a given year. The specific CO2 target of a
manufacturer exceeding this LEV benchmark would be adjusted as follows: each
LEV registration above the benchmark would be rewarded on a 1%/1% ratio,
meaning that a manufacturer registering 1% more LEV than the benchmark
would get a 1% less stringent CO2 target. The CO2 target adjustment would be
limited to 5% in order to avoid it to be weakened too much. Assessing
104 Element Energy (2016) Towards a European Market for Electro-Mobility (report for Transport &
Environment) -
https://www.transportenvironment.org/sites/te/files/Towards%20a%20European%20Market%20for%2
0Electro-Mobility%20report%20by%20Element%20Energy.pdf
105 N. Lutsey (2017) Integrating electric vehicles within U.S. and European efficiency regulations (ICCT
Working Paper 2017-07) (http://www.theicct.org/sites/default/files/publications/Integrating-EVs-US-
EU_ICCT_Working-Paper_22062017_vF.pdf)
50
compliance would be done only against the CO2 target. Not meeting the LEV
benchmark would have no consequences for this compliance assessment.
Option LEVT_CRED2: LEV crediting system with two-way adjustment of the
CO2 target
This option only differs from option LEVT_CRED1 in that a manufacturer not
meeting the LEV benchmark level would have to comply with a stricter specific
CO2 target. Again, each LEV registration below the benchmark would be counted
at a 1%/1% ratio, meaning that a manufacturer registering 1% less LEV than the
benchmark would get a 1% more stringent CO2 target. The CO2 target adjustment
would also be limited to 5%. Not meeting the LEV benchmark would therefore be
reflected in the compliance assessment through a more stringent CO2 target.
As regards the percentage of the new vehicle fleet serving as the LEV mandate
(LEVT_MAND) or benchmark (options LEVT_CRED), three options are considered for
cars, labelled LEV%_A, LEV%_B and LEV%_C, and two options for vans, labelled
LEV%_A and LEV%_B. The values chosen for the LEV mandate/benchmark are
incremental compared to the LEV shares in the new vehicle fleet under option LEV0,
while taking account of recent announcements by vehicle manufacturers as regards their
expected LEV share. This is further explained in Section 0.
The assessment will be based on applying the same LEV mandate/benchmark for all
manufacturers. The option of differentiating between OEMs has been not been withheld.
5.4 Elements for cost-effective implementation
5.4.1 Eco-innovations (ECO)
Article 12 of the Cars and Vans Regulations provides manufacturers with the possibility
to take into account CO2 reductions achieved by innovative technologies whose CO2
reducing effect cannot be demonstrated through the official test procedure. Vehicle
manufacturers and component suppliers may apply for the Commission's approval of a
technology as an eco-innovation, if it fulfils the following basic conditions:
The supplier or manufacturer must be accountable for the CO2 savings achieved;
The technologies must make a verified contribution to CO2 reduction;
The technologies must not be covered by the standard test cycle CO2 measurement or
by mandatory provisions covered by the so-called Union's integrated approach to
reach 10 g CO2/km (Article 1 and Article 12(2)(c) of the Cars Regulation106
, see
below for more information).
Where an approved eco-innovation technology is fitted to a manufacturer's vehicles, the
average specific emissions of that manufacturer may be reduced by the CO2 savings from
applying that technology, up to a maximum of 7 g CO2/km per year.
The Commission is empowered to adopt detailed provisions on the application
procedure, including on the implementation of the criteria listed above. So far, the
Commission has adopted more than 20 decisions approving eco-innovations for use in
cars, for instance LED lighting systems and more efficient alternators. No applications
have yet been submitted with regard to vans.
106 This criterion also applies in relation to vans.
51
Both the previous impact assessment107
and the evaluation study concerning the Cars and
Vans Regulations concluded that eco-innovations are effective and efficient as they help
to reduce CO2 emissions at a lower cost than alternative options. While it could be
argued that the stringency of the targets as measured on the official test procedure would
be reduced by this modality, this effect is balanced by the delivery of ‘off cycle’ emission
reductions which cannot be measured on the test procedure and by setting a cap on the
contribution of those reductions to the target achievement.
During the public consultation, a very large majority of stakeholders across all
stakeholder groups was in favour of taking account of CO2 emission reductions arising
from eco-innovations. Moreover, the evaluation study concluded that there is evidence
supporting that the introduction of the Regulations has had a positive impact on
innovation through encouraging higher R&D, and the development and deployment of
fuel efficient technologies in the market. A phase-out of the eco-innovation modality will
therefore not be considered as an option.
The evaluation study as well as stakeholders have however raised the issue of the
administrative burden linked to the application and certification of savings as an issue
and have suggested that the eco-innovation regime could be simplified in order to ensure
a wider up-take of eco-innovations in the EU fleet.
Under the Cars and Vans Regulations (Article 12), the Commission is empowered to
adopt detailed provisions on the application process, through which it may address any
issues related to the administrative burden for industry and/or authorities. The
Implementing Regulations 108
set out the requirements for applications as well as for the
certification by type approval authorities of the CO2 savings from the approved
technologies.
A revision of the Implementing Regulations is currently underway, with a view of
adapting it to the new test procedure WLTP, but also to introduce a number of
simplifications without changing the robustness of the assessment of the applications or
the certification of the savings. The revision includes consideration of the US approach
of determining off-cycle technologies with pre-defined CO2 savings as well as the
possibility for amending existing approval decision upon request by stakeholders or at
the Commission's initiative.
In view of this, it can be concluded that the current concept of eco-innovations is both
efficient in that approved innovations will reduce CO2 emissions and cost-effective in
that their cost should be lower than alternative options, while not causing any significant
adverse effects with regard to the stringency of the targets.
Moreover, the current design of the provisions provides the Commission with the
necessary powers to address effectively the concerns raised by stakeholders and
identified in the relevant studies with regard to the administrative burden.
Against that background, it is considered that the current design of the eco-innovation
modality is fit for purpose and can be maintained for the period 2022 to 2030. However,
two issues require further consideration: the cap for the CO2 savings and the current
exclusion of mobile air-conditioning systems from being eligible as eco-innovations.
Manufacturers have in the context of the introduction of the WLTP requested an increase
in the 7 g CO2/km cap. Manufacturers as well as component suppliers have also called
107 SWD(2012) 213 final
108 Implementing Regulations (EU) No 725/2011 and (EU) No 427/2014.
52
for including mobile air-conditioning systems in the eco-innovation regime, pending any
further regulation of such systems under the type approval legislation.
Cap for the CO2 savings
The current eco-innovation regime includes a cap of 7 g CO2/km for the CO2 savings that
may be taken into account for compliance purposes. The cap applies regardless of the
target level and vehicle category concerned. Until now, the up-take of eco-innovations
has been limited (less than 1 g CO2/km in average savings for the manufacturer with the
highest number of eco-innovations). It is however expected that the amount of eco-
innovation credits used by manufacturers will increase significantly towards the target
years 2020-2021.
The 7 g CO2/km cap has been set by reference to the emissions tested on the NEDC,
while the EU-wide fleet CO2 targets for the period 2022 to 2030 are to be based on the
emissions measured on the new WLTP type approval test. By setting a cap on the eco-
innovation savings, a balance is ensured between incentives given to efficiency
improvements demonstrated on the official test procedure and those given for the
development of more efficient and new technologies that are not covered by that test.
That balance also takes into account the fact that the target level is set on the basis of the
test procedure emissions only.
The majority of technologies that have already been approved as eco-innovations will
continue to fall outside also the WLTP test and will thus still be eligible as eco-
innovations. There is however still uncertainty with regard to the level of the savings that
can be expected from those technologies within the new testing framework as well as for
the potential for other off-cycle technologies.
Against that background, and in order to ensure a smooth transition from the NEDC to
the WLTP testing conditions, it is proposed to maintain the cap at the level of 7 g
CO2/km pending the availability of more information with regard to the level of eco-
innovation savings under the new WLTP test procedure.
In order to be able to take into account the experience that will be gained from the
implementation of that procedure in the next couple of years, it is appropriate to consider
an option providing the Commission with an empowerment to review the level of the cap
so as to ensure that incentives given to eco-innovations remain balanced and effective
over time.
Mobile air-conditioning systems (MAC systems)
Under the Cars and Vans Regulations, measures that are covered by the so-called
"integrated approach" as defined in the 2007 Commission Communication on A
Competitive Automotive Regulatory Framework for the 21st Century109
are not eligible
as eco-innovations110
. This includes, inter alia, MAC systems.
All measures related to this "integrated approach", with the exception of MAC systems,
are subject to mandatory measures. This concerns tyre pressure monitoring systems, tyre
rolling resistance limits, gear shift indicators, fuel efficiency standards for vans and the
use of biofuels. Mandatory measures addressing the efficiency of MAC systems have not
109 COM(2007) 22 final. The measures listed under the "integrated approach" should represent an
additional 10 g CO2/km reduction with a view to bringing the EU fleet average emissions to a level of
120g CO2 /km.
110 Article 1 and Article 12(2)(c) of the Cars and Vans Regulations
53
yet been introduced and the WLTP test procedure, developed in the context of the
UNECE, will not cover such systems in a foreseeable future.
Different studies111
have pointed to the absence of measures addressing the efficiency of
MAC systems as a draw-back, considering that MAC systems are one of the most
important energy consumers on board vehicles, representing an average increase in fuel
consumption in the order of 9%112
. Furthermore, these systems are becoming standard
equipment in new vehicles. The share of new cars equipped with MAC has risen from
around 10% in 1993 to 85 % in 2011113
.
Against that background, it is appropriate to consider the option of incentivising more
energy efficient MAC systems within the context of eco-innovations. More efficient
MAC could reduce the overall fuel consumption by at least 1 or 2%114
.
It should also be noted that the US has introduced an off-cycle regime, according to
which manufacturers that provide efficiency improvements in MAC systems can
generate CO2-efficiency credits. The credits generated by the use of efficient MAC
systems represented an equivalent of around 1.9 g CO2 /km in 2014 and in 2015.
It is therefore proposed to consider the option of extending the scope of the eco-
innovation regime to include MAC systems.
In view of the above, the following options are considered:
Option ECO 0: Change nothing
Option ECO 1: Future review and possible adjustment of the cap on the eco-
innovation savings
This option would maintain the current provisions of Article 12 of the Cars and Vans
Regulations but would introduce an empowerment for the Commission to review and,
where found appropriate following an assessment, adjust the 7 g CO2/km cap set on
the eco-innovation savings.
Option ECO 2: Extend the scope of the eco-innovation regime to include MAC
systems
This option would also maintain the provisions of Article 12 of the Cars and Vans
Regulations including the empowerment to adjust the cap as described in ECO1 but
would remove the exclusion of MAC systems from being eligible as eco-innovations.
The design of the methodology for determining the efficiency of MAC systems
would result from an application by a manufacturer or supplier which would have to
be assessed and approved by the Commission.
111 Ricardo-AEA and TEPR (2015), Evaluation of Regulations 443/2009 and 510/2011 on the reduction of
CO2 emissions from light-duty vehicles; CE Delft and TNO (2017) Assessment of the Modalities for
LDV CO2 Regulations beyond 2020, report for the European Commission (DG CLIMA)
112 JRC (2016): Review of in use factors affecting the fuel consumption and CO2 emissions of passenger
cars, https://ec.europa.eu/jrc/en/publication/eur-scientific-and-technical-research-reports/review-use-
factors-affecting-fuel-consumption-and-co2-emissions-passenger-cars
113 Hill, N., Walker, E., Beevor, J., James, K. (2011), ‘2011 Guidelines to Defra/DECC’s GHG Conversion
Factors for Company Reporting, Defra PB13625, UK.
114 JRC (2016): Review of in use factors affecting the fuel consumption and CO2 emissions of passenger
cars, https://ec.europa.eu/jrc/en/publication/eur-scientific-and-technical-research-reports/review-use-
factors-affecting-fuel-consumption-and-co2-emissions-passenger-cars
54
5.4.2 Pooling (POOL)
The current Regulations (Article 7) offer individual manufacturers the possibility to form
a "pool" for the purposes of meeting their emission targets. Such agreement enables a
group of manufacturers to be counted as one entity for the purpose of compliance with
the joint target. This allows manufacturers to decide on the most efficient way of
complying with the targets. All manufacturers covered by the scope of the Regulations,
which have not been granted a derogation (see section 5.4.5), could be part of a pool.
Pooling has been extensively used under the current Regulations. In 2015, pooling was
used by 49 car manufacturers, responsible for 81% of all new car registrations in that
year and by 25 van manufacturers, responsible for 70% of all new van registrations in
that year. Forming a pool has prevented several manufacturers from exceeding their
individual specific emissions target (in 2015 this was the case for 23 car manufacturers
and 4 van manufacturers, which were member of a pool)115
.
The vast majority of pools have been formed by manufacturers belonging to the same
group of connected undertakings. Independent manufacturers may also form pools,
however, until now this possibility has been rarely used. A pool formed by independent
manufacturers would, in accordance with competition rules, have to be open to the
participation of any other manufacturer requesting to participate. This reduces somewhat
the utility of such, so called "open", pools with regard to compliance planning.
In order to enhance pooling as an instrument for all manufacturers to reduce compliance
costs, the conditions under which open pools may be formed by independent
manufacturers and under which conditions another manufacturer may request to join an
existing open pool could to be clarified. An option is therefore introduced whereby the
Commission is empowered to complement the existing provision by developing specific
criteria for the open pool arrangements, in particular with a view to address any relevant
competition aspects.
In view of the above, the following options should be considered:
Option POOL 0 – change nothing – current pooling regime
Option POOL 1 – an empowerment for the Commission to specify the conditions
for open pools arrangements
5.4.3 Trading (TRADE)
Trading has been suggested as a complement to pooling in order to provide additional
flexibility for manufacturers in meeting the targets. Trading would allow individual
manufacturers (or pools) to trade credits depending on their performance. This means
that when a manufacturer (pool) overachieves its specific CO2 emissions and/or LEV
mandate, this would result in credits that could be sold to another manufacturer (pool),
which would otherwise not meet its target.
115 See Commission Implementing Decision (EU) 2016/2319 of 16 December 2016 confirming or
amending the provisional calculation of the average specific emission of CO2 and specific emissions
targets for manufacturers of passenger cars for the calendar year 2015 pursuant to Regulation (EC) No
443/2009, OJ L 345, 20.12.2016, p. 74; Commission Implementing Decision (EU) 2016/2320 of 16
December 2016 confirming or amending the provisional calculation of the average specific emissions
of CO2 and specific emissions targets for manufacturers of new light commercial vehicles for the
calendar year 2015 pursuant to Regulation (EU) No 510/2011, OJ L 345, 20.12.2016, p. 96
55
The main distinction compared to pooling is that trading would not require an upfront
decision by manufacturers on how to ensure compliance with the target. The decision to
trade could take place only at the time the provisional performance of the manufacturer
(pool) is known.
Just as for pooling, trading would support the meeting of the CO2 targets or a LEV
mandate or a combination of both.
In the case of a LEV mandate (LEVT_MAND), different design options are possible,
mainly in relation to how any LEV generating credits are being accounted for in relation
to the CO2 targets116
.
Under a LEV crediting system (options LEVT_CRED), a separation between LEV
credits and CO2 emission credits would not be necessary. For example, a manufacturer
that does not achieve the LEV benchmark would have to meet a more stringent CO2
target. If that leads to non-compliance with the CO2 target, the manufacturer would have
to buy credits from a manufacturer overachieving on its CO2 target.
In light of the above the following options are considered:
Option TRADE 0: Change nothing – no trading
Option TRADE 1: Introduce trading as an additional modality for reaching
the CO2 targets and/or LEV mandates
Under this option, individual manufacturers (or pools) (which do not benefit from
a derogation) would be allowed to exchange CO2 and/or LEV credits on an 'ad
hoc' basis. This would require the establishment of a register to ensure full
transparency and accountability of all transactions among manufacturers.
Trading would be allowed for cars and for vans separately (not amongst them).
5.4.4 Banking and borrowing (BB)
Banking and borrowing are mechanisms used in different regulatory environments
setting policy targets for individual actors with the aim of increasing flexibility and
therefore lowering the cost of compliance. The rationale is that the overall desired
outcome should be achieved by a certain time, while acknowledging that the optimal
route to that point may differ between actors.
For the LDV CO2 legislation, banking would mean that when in a given year the average
specific CO2 emissions of a manufacturer (pool) are below its specific emissions target,
the manufacturer (pool) can carry over the difference between its emissions and its target
as CO2 credits for future compliance purposes. In case its average specific CO2 emissions
exceed the specific emissions target in one of the following years, the manufacturer
(pool) can offset these excess emissions with the ‘banked’ CO2 credits from preceding
year(s).
Borrowing would mean that, in a given year, a manufacturer (pool) could comply with its
CO2 target by 'borrowing' CO2 credits, which have to ‘paid back’ in subsequent years.
In order to ensure that the EU-wide fleet CO2 target set for a certain date is actually met,
banking and borrowing needs to be limited. For the definition of such a limit, the
timeline for the new CO2 emissions target(s) (options TT, see Section 5.1.2) is critical.
116 Element Energy (2016): "Towards a European Market for Electro-Mobility" (report for Transport &
Environment)
56
If new targets are only set in discrete years (e.g. 2025 and/or 2030), it would be
necessary to define a target trajectory against which emissions in the intermediate years
would be compared for the purpose of granting credits. This would avoid that too many
credits are accumulated before 2025, respectively 2030, which otherwise would allow a
manufacturer (pool) to significantly exceed the target and hence undermine the intended
CO2 emission reductions for that time period. In case of annual CO2 targets, these would,
by definition, provide for such a trajectory.
However, even if a trajectory is set, there may still be a risk of too many credits being
accumulated over time. In order to prevent this, banking could be limited to certain time
periods (e.g. 2025-2030) or even to one year (e.g. 2025, when overachieving the
applicable target or the trajectory). In the latter case, credits could only be used for
compliance with the 2030 target. Finally, the use of banked credits could be limited to
the year 2030 and no credits could be used after that year (assuming that a target will
remain in place in subsequent years).
Links with the LEV incentives
In case of option LEVT_MAND, the above considerations would equally be valid in
relation to the LEV mandate.
However, the situation is different in case of a LEV crediting system (options
LEVT_CRED) where compliance assessment is based on the CO2 target only and
therefore already makes a link between the LEV benchmark and the CO2 target. Hence,
under that option, banking would only be necessary in relation to the CO2 target.
In light of the above-mentioned considerations, the following options are considered:
Option BB 0: Change nothing
Under this option, no banking or borrowing would be allowed.
Option BB 1: Banking only
Under this option, banking of CO2 and/or LEV credits would be allowed, but no
borrowing.
Option BB 2: Banking and borrowing:
Under this option, both the banking and borrowing of CO2 and/or LEV credits
would be allowed.
5.4.5 Exemptions and derogations
The Cars and Vans Regulations acknowledge that CO2 targets should be determined
differently for smaller manufacturers as compared to larger ones, taking account of their
capability to meet such standards. The Regulations therefore contain the following
derogations:
A de minimis exemption (cars and vans), which was introduced in the legislation
in 2014 for manufacturers responsible for less than 1,000 newly registered
vehicles per year. This exempts small manufacturers, in many cases SMEs, from
meeting a specific CO2 emissions target and hence from applying for a
derogation, thus reducing administrative burden;
Small volume derogations (cars and vans): manufacturers (or a group of
connected undertakings) responsible for between 1,000 and 10,000 cars registered
per year or between 1,000 and 22,000 vans registered per year can apply to the
Commission for an individual target consistent with their reduction potential;
57
Niche derogations (cars only): manufacturers (or a group of connected
undertakings) responsible for between 10,000 and 300,000 cars registered per
year can apply for an individual target in 2021, corresponding with a 45%
reduction from their 2007 average emissions.
5.4.5.1 'De minimis' exemptions' and 'small volume' derogations
De minimis exemptions reduce compliance and administrative costs for small
manufacturers which are in many cases SMEs. Since they are exempt from meeting a
specific CO2 target they have no compliance costs for adapting their vehicles to meet
CO2 standards. The evaluation study estimated that the exemption reduces the
administrative burden for the eligible manufacturers by around € 25,000 per
manufacturer. It also facilitates the market entry of new manufacturers whilst having no
significant impacts on the CO2 reductions of the overall EU vehicles fleet. During the
public consultation, small car manufacturers underlined the importance of this
exemption, with no other stakeholders questioning it.
The evaluation study also identified the small volume derogations as a potential
weakness, but also confirmed that its impacts in this respect had been relatively small.
Most stakeholders also supported this derogation regime, although some environmental
NGOs and public authorities were opposed.
In 2015/2016, 23 car manufacturers benefitted from this derogation, 18 of which had less
than 1,000 registrations and could thus have benefitted from the de minimis exemption
(many small manufacturers continue to apply for derogations since EU derogations are
required to avoid penalties when selling vehicles on the Swiss market). Without a
derogation (or exemption) all of these car manufacturers would have exceeded their
specific emissions target.
Six van manufacturers (or pools) applied for this derogation in 2015/2016, three of which
had less than 1,000 vans registered in these years and were thus eligible for the de
minimis exemption 117
. Four other manufacturers, which were eligible for the derogation,
did not apply for it as they met their 'default' (Annex I) target.
In considering possible options, it does not appear appropriate to completely exempt this
group of manufacturers from meeting any CO2 targets in view of the emission reduction
potential in this segment, including the introduction of alternative powertrains. On the
other hand, applying the same targets as for large volume manufacturers, based on the
limit value curve, would mean that the reduction effort imposed on the small volume
manufacturers would be significantly higher compared to large volume manufacturers
taking account of their capability to meet emission standards (e.g. smaller fleet, fewer
models).
The options of complete exemption or applying the same targets as for large volume
manufacturers are therefore not considered further.
While some manufacturers applying for the derogation have pointed to the administrative
burden of the application procedure as an issue, it should be noted that the Commission is
empowered to define the detailed provisions on the application procedure and assessment
117 The three manufacturers with more than 1,000 van registrations were Jaguar Land Rover (18460 vans in
2015 and 7435 in 2016), Mitsubishi (pool) (16,167 vans in 2015 – and 17,431 in 2016), and Piaggio &
C SPA (2,621 vans in 2015 and 2,966 in 2016),
58
criteria. These concerns can effectively be addressed through a simplification of the
current applicable rules which are defined under comitology118
.
In view of the above, the impact assessment does not consider specific options to change
the existing regime of de minimis exemptions and small volume manufacturers.
5.4.5.2 Niche derogations for car manufacturers (NIC)
The Cars Regulation allows a 'niche' car manufacturer to meet a fixed emission reduction
percentage set in relation to its emissions in 2007 (25% reduction by 2015 and 45% by
2021) instead of the 'default' emission target according to the limit value curve (Annex I
to the Regulation). It should be noted that the percentage emission reduction between the
2015 and 2021 'niche' derogation targets is the same as the one between the fleet-wide
targets set in the Regulation for those years (130 g/km and 95 g/km, respectively).
In 2015/2016, eight manufacturers or pools were eligible for a niche derogation but only
five have applied to the Commission. Four out of the eight119
were below their 'default'
(Annex I) specific emissions target in one or both years and so strictly speaking did not
need a derogation to comply with the Regulation.
It results from the evaluation study that this derogation potentially weakens the delivery
of CO2 emissions reductions. If all of the eligible manufacturers would apply for the
derogation, the number of cars covered could then increase by up to five times120
.
During the public consultation, car manufacturers supported the continuation of this
derogation regime but a majority of environmental and transport NGOs as well as all
consumer organisations were against it.
Taking into account those considerations, the following options will be considered:
Option NIC 0: Change nothing
This would mean maintaining the current provisions of the Cars Regulation. As a
result, the 'niche' manufacturers would have to continue to comply after 2021 with
the current derogation target, i.e. 45% reduction from their 2007 average emissions.
Option NIC 1: Set new derogation targets for 'niche' manufacturers
Under this option, new "niche" targets would be defined for the period post-2021 on
the basis of the overall CO2 reduction targets defined for the EU-wide fleet (TLC, see
Section 5.1.1). The starting point for the 'niche' manufacturers would be their specific
emission target for 2021. This approach would be in line with the reduction pathway
set in the current Regulations between 2015 and 2021.
Option NIC 2: Remove the 'niche' derogation
Under this option, no 'niche' derogations would be foreseen. This would mean that
the 'niche' manufacturers would be covered by the same rules as the larger
manufacturers as regards the target levels (see Section 5.1.1.1), distribution of effort
(see Section 5.2) and LEV/ZEV incentives (see Section 5.3.2).
118 Commission Regulation (EU) No 63/2011 and Commission delegated Regulation (EU) No 114/2013.
119 Volvo Corporation, Mitsubishi Motors Pool, Honda Motor Europe Pool (2015 and 2016) and, Tata
Jaguar Land Rover Pool (2016 only)
120 The evaluation study referred to the situation in 2013, where manufacturers that applied for the niche
derogation had registered a total of 439,000 new cars.
59
5.5 Governance
The CO2 emission targets for LDVs are set and enforced using as reference a
standardised type approval test, taking place in a laboratory. This approach is used
worldwide and allows for comparability, reproducibility, verifiability and planning
certainty. The effectiveness of the targets in reducing CO2 emissions in reality depends
on the one hand on the representativeness of the test procedure with respect to average
real-world driving, and on the other hand on the extent to which the vehicles placed on
the market conform to the reference vehicles tested at type approval.
As highlighted in the evaluation report and in the opinion of the Scientific Advice
Mechanism121
, it is widely accepted that the currently used NEDC laboratory test is no
longer representative of today's driving conditions and vehicle technologies. Evidence
taken from a number of sources indicates a growing divergence over the past years, up to
around 40%, between the certified emissions and the emissions of vehicles driven on
European roads122
.
Factors which have contributed to this divergence include: the deployment of CO2
reducing technologies delivering more savings under test conditions than on the road;
exploitation of flexibilities in the test procedure; growing deployment of untested energy
consuming devices; driver independent circumstances like weather, road conditions or
trip types; driving style and driving modes123
.
During the public consultation there was very strong support across all stakeholder
groups for the Commission to explore the potential to further reduce the divergence
between the test cycle and real world emissions. Only representatives of car
manufacturers and one component supplier were against this. All stakeholder groups,
except for car manufacturers, supported establishing additional driving tests to give
values closer to real driving emissions.
Application of the WLTP, which is mandatory in the EU for all new car types from
September 2017 and for all new cars and vans from September 2019, will result in more
realistic CO2 values.
However, the longer-term effectiveness of the shift to WLTP in closing the gap will
depend on the extent to which it will remain representative of real-world driving
circumstances and on the degree to which it is enforced, including via market
surveillance instruments.
The following sections set out the options considered in relation to these two governance
aspects.
121 Scientific Advice Mechanism (SAM): Closing the gap between light-duty vehicle real-world CO2
emissions and laboratory testing. High Level Group of Scientific Advisors, Scientific Opinion No.
1/2016,
https://ec.europa.eu/research/sam/pdf/sam_co2_emissions_report.pdf#view=fit&pagemode=none
122 ICCT (2016): From laboratory to road – a 2016 update of official and 'real-world' fuel consumption and
CO2 value for passenger cars in Europe,
http://www.theicct.org/sites/default/files/publications/ICCT_LaboratoryToRoad_2016.pdf
123 JRC (2016): Review of in use factors affecting the fuel consumption and CO2 emissions of passenger
cars, https://ec.europa.eu/jrc/en/publication/eur-scientific-and-technical-research-reports/review-use-
factors-affecting-fuel-consumption-and-co2-emissions-passenger-cars
60
5.5.1 Real-world emissions (RWG)
The effectiveness of technologies applied to reduce the CO2 emissions of vehicles is
affected by the actual driving conditions. This effectiveness can therefore not be fully
captured by a laboratory emissions test procedure, in particular given the rapid evolution
of these technologies.
Therefore, it is generally accepted that the emissions determined through a test procedure
differ from the actual emissions achieved in the real world124
. As such, this is not
problematic for designing CO2 targets relying on type approval values, as long as the
expected divergence between the test procedure and the real world emissions can be
estimated correctly (see Annex 6). However, for the CO2 targets to fulfil their objective,
it is important that any remaining divergence under the test procedure does not increase
over time.
This consideration also applies with regard to consumer information. Type approval
values of CO2 and fuel consumption are used by consumers to compare different
vehicles' performance in terms of fuel efficiency. In order avoid that consumers are
misled with regard to the performance of vehicles, information on how type approval
values compare to real world values should be readily available. Easy access to real
world fuel and energy consumption data should contribute to achieve that and would also
be an important step towards increased transparency and rebuilding consumer trust in the
automotive industry as well as in the type approval system.
The following two options are considered with a view to address both the need to verify
and ensure the representativeness of the new test procedure and to provide consumers
with robust real world data on vehicle CO2 emissions and fuel consumption:
Option RWG 0: Change nothing
This option assumes that the new test procedure WLTP, its periodic revision and the
(proposed) revision of the type approval testing125
would be sufficient to ensure the
representativeness of the test procedure over time, with a limited and stable
divergence with respect to average real-world emissions. It also assumes that the CO2
and fuel consumption data resulting from the WLTP test would be sufficient in terms
of consumer information.
Option RWG 1: Collection, publication, and monitoring of real world fuel
consumption data
This option considers two main complementary sources: firstly, the collection by
manufacturers of real world fuel and energy consumption data from new vehicles
and their publication on-line or by other easily accessible means. Secondly, the
monitoring and assessment by the Commission of the manufacturer data and, if
appropriate, from national sources, such as from periodic technical inspections, with
a view to continuously evaluate the representativeness of the WLTP.
124 CARB 2015, Staff Report: Technical Status and Proposed Revisions to On-Board Diagnostic System
Requirements and Associated Enforcement Provisions for Passenger Cars, Light-Duty Trucks, and
Medium-Duty Vehicles and Engines (OBD II)
(https://www.arb.ca.gov/regact/2015/obdii2015/obdii2015isor.pdf)
125 European Commission, 2016: Proposal for a Regulation of the European Parliament and of the Council
on the approval and market surveillance of motor vehicles and their trailers, and of systems,
components and separate technical units intended for such vehicles, COM(2016) 031 final
61
The implementation of these measures would require an empowerment for the
Commission to determine the conditions for the collection and publication of the
data, inter alia taking into account relevant data protection requirements. This
empowerment would enable the development of a methodology to access, monitor
and evaluate on a regular basis the average real world CO2 emissions of the new
vehicle fleet (and/or sub-fleets thereof) and determine how that evolves in
comparison to the corresponding type approval values. The findings based on that
evaluation would be an essential element to be considered in a review of the WLTP
test procedure and, where necessary, of the CO2 emission standards.
These measures require the availability of relevant data on real world fuel and energy
consumption which are described below.
Standardized 'fuel consumption measurement device'
The Commission is currently preparing an amendment, in the context of the type
approval legislation, of the WLTP Regulation 2017/1151 to lay down an obligation for
manufacturers to fit a standardized 'fuel consumption measurement device' in the new
vehicles.
This measure is not covered as an option in this impact assessment as it concerns an
obligation under type approval legislation through a comitology act. It should however
be noted that the cost for cars to be equipped with standardised, accurate and accessible
on-board fuel-consumption measurement devices is estimated to be very low - in the
order of 1 euro per vehicle126
. - and they already exist in today's vehicles127,128,
, but the
information is not accessible Moreover, this enabling technology has already been
mandated in California129
as of 2019.
The data resulting from such fuel consumption measurements would provide a robust
basis to verify the representativeness of the WLTP type approval emission values and
monitor the gap. It would also provide consumers with reference real world data on the
basis of which they can assess how their own fuel economy compares to the average real
world fuel consumption. In addition, it would enable simplified on-road fuel
consumption measurements on a large number of vehicles.
An empowerment would be required for the Commission to develop the necessary
provisions for the collection of the data as well as for the conditions for access and
publication. This approach is in line with the recommendation of the European
Parliament (following the work of its EMIS Committee)130
, the opinion of the Scientific
126 CARB (2015) Staff Report: Technical Status and Proposed Revisions to On-Board Diagnostic System
Requirements and Associated Enforcement Provisions for Passenger Cars, Light-Duty Trucks, and
Medium-Duty Vehicles and Engines (OBD II),
https://www.arb.ca.gov/regact/2015/obdii2015/obdii2015isor.pdf
127 TNO (2010) Effects of a gear-shift indicator and a fuel economy meter on fuel consumption
https://circabc.europa.eu/webdav/CircaBC/GROW/wltp/Library/WLTP/consumption_meter/121018_l
egislation/FCM%20-%20GSI%20efficiency%20(TNO).pdf
128 TNO (2013) Fuel consumption meter requirements for light-duty vehicles – Final report
https://publications.europa.eu/en/publication-detail/-/publication/ffa5ab82-0bc2-472f-af0c-
9d0d82a6b91f
129 CARB (2016) OBD II regulation, section 1968.2 of title 13, California Code of Regulations, as
approved by OAL on July 25, 2016.
https://www.arb.ca.gov/msprog/obdprog/section1968_2_clean2016.pdf
130 European Parliament recommendation of 4 April 2017 to the Council and the Commission following the
inquiry into emission measurements in the automotive sector (2016/2908(RSP))
62
Advice Mechanism131
, as well as the technical assessment by the Commission's Joint
Research Centre (see Annex 6).
Other data sources
In the absence of standardised on-board fuel sensors, real-world fuel consumption data
can be gathered via self-reporting platforms or fleet operators132,133
even though such
data are subject to inherent bias. The gap can also be estimated using a simulation
software like the Green Driving Tool developed by the Commission's Joint Research
Centre134,135
.
CO2 measurements are also performed at type-approval (ex-ante) as part of the Real
Driving Emissions (RDE) procedure for pollutant emissions introduced gradually as of
2017136
. Their measurement is necessary to validate the procedure itself. However, there
is no evidence to date for the degree of representativeness of these data with respect to
corresponding ex-post average real-world driving emissions, and there is a risk of bias
and inconsistency across the tested vehicle types (see Annex 6).
Other option considered: elaboration of an ex-ante CO2 real-driving emissions
procedure, including the determination of a not-to-exceed limit
In their response to the public consultation, some environmental and transport NGOs and
car drivers associations suggested to develop a dedicated new RDE test protocol for CO2
emissions using Portable Measurement Equipment Systems (PEMS). In addition, binding
not-to-exceed limits for CO2 emissions would be introduced. These not-to-exceed limits
would be based on the difference between the emissions measured during the WLTP test
cycle and the new RDE procedure for CO2 emissions. This would add another level of
compliance checking, in a similar way as for air pollutant emissions.
The feasibility of such an approach is highly uncertain due in particular to the high
variability in the CO2 emissions under real world conditions. RDE CO2 test results are
strongly influenced by external factors, such as temperature, humidity, and driving
behaviour. Consequently, the test results cannot offer the precision needed for regulatory
purposes, such as target setting, compliance checking or for imposing financial penalties.
(http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2017-
0100&language=EN&ring=B8-2017-0177)
131 Scientific Advice Mechanism (SAM)(2016) Closing the gap between light-duty vehicle real-world CO2
emissions and laboratory testing. High Level Group of Scientific Advisors, Scientific Opinion No.
1/2016,
https://ec.europa.eu/research/sam/pdf/sam_co2_emissions_report.pdf#view=fit&pagemode=none
132 Tietge U. et al (2016), From Laboratory To Road - A 2016 Update Of Official And ‘Real-World’ Fuel
Consumption And CO2 Values For Passenger Cars In Europe (ICCT)
133 Greene D.L. et al (2015), How Do Motorists' Own Fuel Economy Estimates, How Do Motorists' Own
Fuel Economy Estimates Compare with Official Government Ratings? A Statistical Analysis, Baker
Reports
134 https://green-driving.jrc.ec.europa.eu
135 Zacharof N-G, Fontaras G., Ciuffo B., Tsiakmakis S., Anagnostopoulos K., Marotta A., Pavlovic J.
(2016). Review of in use factors affecting the fuel consumption and CO2 emissions of passenger cars.
JRC100150.
136 Commission Regulation (EU) 2017/1154,
http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32017R1154
63
In a laboratory test – such as the WLTP – such external factors can be controlled and the
test values can as a consequence ensure the necessary legal certainty and precision137
.
Custom-tailored test protocols of individual manufacturers (or groups) may provide more
realistic fuel consumption and CO2 emission values than a laboratory test. They can
provide useful information to consumers. However, such protocols rely on test data from
a limited number of vehicle models and selected drivers, and make use of monitored real
world emissions of these specific fleets. As a consequence, these test protocols are not
exposed to the same variability or uncertainties as compared to a more generic protocol
that would have to apply in an equivalent way and with similar accuracy to any vehicle
on the EU market.
In view of the above, the elaboration of an EU-wide ex-ante CO2 real-driving emissions
procedure at type-approval, including the determination of a not-to-exceed limit for the
purpose of target setting and compliance checking does not appear feasible and is
therefore discarded from further analysis.
5.5.2 Market surveillance (conformity of production, in service conformity) (MSU)
As recommended by the European Parliament following the work of its EMIS
Committee138
and stressed by several consumer organisations and environmental
NGOs139
, it is necessary to put in place the means to detect irregularities in the CO2 and
fuel consumption data.
Recent test campaigns performed by independent laboratories, have provided indications
of CO2 emission values deviating significantly from the values determined at type
approval140
. Such deviations may undermine the achievement of the reduction objectives,
distort competition among manufacturers and undermine consumer confidence in the
type approval fuel consumption data.
Type approval tests are performed on a vehicle, which is representative of a certain
vehicle family. The CO2 emissions of each vehicle produced that the manufacturer
attributes to that family must conform to the emissions of the approved type. The
manufacturer certifies this in a certificate of conformity which is issued as a condition for
placing a vehicle on the market.
137 Scientific Advice Mechanism (SAM): Closing the gap between light-duty vehicle real-world CO2
emissions and laboratory testing. High Level Group of Scientific Advisors, Scientific Opinion No.
1/2016,
https://ec.europa.eu/research/sam/pdf/sam_co2_emissions_report.pdf#view=fit&pagemode=none
138 European Parliament recommendation of 4 April 2017 to the Council and the Commission following the
inquiry into emission measurements in the automotive sector (2016/2908(RSP))
139 BEUC (2016): Urgent need for better oversight of cars – A consumer view on the Commission proposal
on type approval and market surveillance, http://www.beuc.eu/publications/beuc-x-2016-
052_smacca_beuc_typeapproval_marketsurveillance_positionpaper_final.pdf;
ICCT (2017): Market surveillance of vehicle emissions: Best-practice examples with respect to the
European Commission's proposed type-approval framework regulation,
http://www.theicct.org/sites/default/files/publications/PV-in-use-surveillance_ICCT-position-
brief_13072017_vF.pdf
140 Ministère de l'Environnement, de l'Énergie et de la Mer (2016): Rapport final de la commission
indépendante mise en place par la Ministre Ségolène Royal après la révélation de l’affaire
Volkswagen, http://www.ladocumentationfrancaise.fr/var/storage/rapports-publics/164000480.pdf;
TNO (2016): NEDC – WLTP comparative testing, TNO 2016 R11285,
http://publications.tno.nl/publication/34622355/ZCzWY2/TNO-2016-R11285.pdf
64
Each year, Member States report the CO2 emission values recorded in the certificates of
conformity of the newly registered vehicles to the Commission. On that basis, the
Commission determines the annual average specific emissions of a manufacturer for the
purpose of checking compliance with the specific CO2 emissions target.
For the CO2 reduction objectives to be achieved, it is essential that the CO2 emissions of
the vehicles placed on the market conform to the type approved values.
Under the type approval legislation, the conformity of the CO2 emissions is currently
verified only at the stage of production. Some vehicles are selected from the production
line by the manufacturer and tested to verify that the CO2 emissions are in line with those
of the approved type. If this is not the case, the manufacturer has to take measures to
bring the vehicles to be produced into conformity or perform a new type approval test.
A procedure for verifying the CO2 emissions of vehicles on the road, i.e. a so called in-
service conformity test, is not yet in place. However, a proposal for setting up such a
procedure is under discussion by the co-legislators141
. In case in-service tests would not
be retained in type approval legislation following the on-going co-decision process, an
empowerment for the Commission to set up an independent testing of vehicles in use
could be considered as part of this proposal.
In view of this, the following options are considered to ensure that the emissions of
vehicles placed on the market continue to adequately reflect the CO2 emissions
determined at type approval, to minimise the risk of deviations occurring and, if they
occur, to ensure that the consequences for the CO2 reduction objectives can be
adequately addressed.
Option MSU 0: Change nothing
This option would mean that the CO2 monitoring provisions set out in the Cars and
Vans Regulations142
and the associated implementing legislation continue to apply.
This allows the Commission to amend the CO2 monitoring data reported by Member
States where manufacturers have found and notified errors in that data143
. The
verification by a manufacturer is voluntary and there is no explicit obligation placed
on either manufacturers or Member States to report to the Commission deviations
found from the type approved CO2 emission values.
Option MSU 1: Obligation to report deviations and the introduction of a correction
mechanism
Under this option, an obligation would be introduced in the legislation requiring
Member States and manufacturers to systematically inform the Commission of any
findings resulting from conformity of production tests or, where applicable, from in-
service conformity tests, and inform of deviations from the type approved CO2
emissions affecting the monitored CO2 data.
The monitoring data for a manufacturer would be corrected in those cases where
serious deviations from the type approval values have been detected which cannot be
technically or otherwise justified. The empowerment would allow the Commission to
141 European Commission (2016): Proposal for a Regulation of the European Parliament and of the Council
on the approval and market surveillance of motor vehicles and their trailers, and of systems,
components and separate technical units intended for such vehicles, COM(2016)031 final.
142 Article 8 of the Cars and Vans Regulations
143 See Article 8(5) of Regulation (EC) No 443/2009 and Article 8(6) of Regulation (EU) No 510/2011
65
define the way in which deviations may be detected and how these should be reported
to the Commission as well as taken into account for the compliance checking. This
could build on measures defined within the framework of the type approval
legislation, or as an independent testing procedure to be defined under the CO2
regulations.
66
6 WHAT ARE THE ECONOMIC/EMPLOYMENT, ENVIRONMENTAL AND
SOCIAL IMPACTS OF THE DIFFERENT POLICY OPTIONS AND WHO
WILL BE AFFECTED?
6.1 General methodological considerations
The quantification of the impacts, in particular as regards the target levels, distribution of
effort and LEV incentives - see Sections 6.3.2, 6.4 and 0 - relies on a suite of models and
a dedicated set of cost curves covering a broad range of up-to-date technologies for
reducing CO2 emissions from cars and vans.
These cost curves, which show the CO2 reduction potential and costs for over 80
technologies, were determined as part of a study144
on which car manufacturers, suppliers
and other stakeholders provided input and were extensively consulted. The technologies
considered include those that are currently already utilised in vehicles in the marketplace,
as well as those expected to be available in the near future, and also options that have
been proposed or are under development that could feasibly be introduced to the
marketplace in the 2020-2030 period. Starting from a detailed assessment of these
technologies, a total of 252 cost-curves on a WLTP basis was generated for different
combinations of powertrain type (conventional, PHEV, BEV, FCEV), vehicle segment
(four size classes for cars and three for vans) and year (2015, 2020, 2025 and 2030).
In the preparation of the cost curves, which represent a cost-optimal combination of
technologies to be fitted in the vehicles to reach specific CO2 reduction levels, the
possibility (or impossibility) to combine technologies has been duly taken into account,
as has their pre-existing market penetration in the vehicles fleet, and overlaps in the CO2
saving potential of technologies when combined into packages.
In addition, for the purpose of analysing the sensitivity of cost assumptions apart from
the "medium" costs, a number of cost-curves were developed illustrating the impact of
low and high technology cost estimates. These different cost estimates were calculated
using a methodological approach developed and refined in consultation with stakeholders
and a statistical model to assess the uncertainty in the future cost projections. The
"medium" cost case represents the most likely scenario resulting from significant future
technology deployment to meet post-2020 CO2 targets. The projected future costs of
BEV, PHEV and FCEV powertrains take into account economies of scale and potential
rates of learning on the cost reduction of key components (i.e. notably batteries and fuel
cells) in different market deployment scenarios. These costs have also been reviewed in
the light of the more rapid than expected reductions in battery costs.
The PRIMES-TREMOVE model is used to project the evolution of the road transport
sector. This model was consistently used for climate, energy and transport initiatives in
the past, including for the 2016 Commission initiatives concerning the Effort Sharing
Regulation (ESR), the Energy Efficiency Directive (EED), the Low-Emission Mobility
Strategy, the Eurovignette Directive, as well as impact assessment on the Clean Vehicles
Directive which was conducted in parallel. In addition, macro-economic models (GEM-
E3, E3ME) and the DIONE model developed by the JRC have been used. All analytical
models used are described in detail in Annex 4.
144 Ricardo Energy and Environment (2016) Improving understanding of technology and costs for CO2
reductions from cars and LCVs in the period to 2030 and development of cost curves (report for the
European Commission, DG CLIMA)
67
The baseline used for this impact assessment builds on the "Reference Scenario 2016"
(Ref2016)145
, which was used as the baseline for the ESR and EED proposals and the
Low-Emission Mobility Strategy. In this scenario the market uptake of advanced
technologies is estimated to remain rather low, not allowing for economies of scale, i.e.
costs for these advanced technologies staying high.
The baseline includes a few policy measures adopted after the cut-off date of Ref2016
(end of 2014). Furthermore, some further differentiation in the model assumptions was
needed in view of new information from specific studies, in particular:
(1) Updated cost curves were used, as explained above. The new costs are lower than
the costs used as assumptions in Ref2016 and other previous analytical work
performed with the PRIMES-TREMOVE model.
(2) Based on a recent JRC study146
and other publications, a higher gap between
emissions measured during NEDC testing and those in real driving conditions has
been applied, on average about 37% for cars and 33% for vans147
.
(3) The transition from the NEDC to the WLTP test cycle has been factored in by
converting NEDC to WLTP emission values, using conversion factors derived by
the JRC for this purpose (see Annex 4.5). For conventionally fuelled vehicles,
these conversion factors are 1.21 for cars and 1.30 for vans, with specific values
depending on the segments and powertrains.
Finally, the latest set of data from monitoring the implementation of the Cars and Vans
Regulations (2015) has been used to properly reflect the current fleet composition and
the turn-over rate for cars.
The baseline assumes that the EU-wide CO2 standards for the new passenger cars and
vans fleets remain at the same level as in the current Regulations after 2020/2021 (i.e. 95
g CO2 /km for cars and 147 g CO2/km for vans). This would lead to a reduction of CO2
emissions in the period between 2020 and 2030 due to the renewal of the fleet and the
reduction of the technology costs over time, which triggers the uptake of more efficient
vehicles. However, in absence of new targets, the CO2 emissions reductions remain
limited. Figure 9 shows that the GHG emissions from road transport are expected to
decrease by 17% in 2030 with respect to 2005.
145 European Commission (2016) EU Reference Scenario 2016 - Energy, transport and GHG emissions :
trends to 2050 (https://publications.europa.eu/en/publication-detail/-/publication/aed45f8e-63e3-47fb-
9440-a0a14370f243)
146 Zacharof N-G, Fontaras G., Ciuffo B., Tsiakmakis S., Anagnostopoulos K., Marotta A., Pavlovic J.
(2016) Review of in use factors affecting the fuel consumption and CO2 emissions of passenger cars.
JRC100150.
147 Taking into account the correlation factors applied between WLTP and NEDC, the average remaining
gap between the WLTP emissions and the real driving emissions is about 13% for cars and about 3%
for vans (specific values depend on the segments and powertrains).
68
Figure 9: Projected trend of greenhouse gas emissions from road transport between
2005 and 2030 under the baseline
In particular, CO2 emissions from passenger cars and vans reduce by 26% and 17%
respectively between 2005 and 2030. In a context of projected growing activity, these
reductions are achieved due to the penetration in the fleet of more efficient vehicles. The
monitored type-approval CO2 values of new passenger cars and vans decrease
respectively by 14% and 11% between 2020 and 2030.
The resulting composition of the new passenger car and van fleet in 2025 and 2030 is
shown in Section 6.3.2.1 in Table 6 (TLC0) and Table 7 (TLV0). The uptake of LEV
remains limited, especially when considering that by 2050 the fleet share of these
vehicles should be around 68-72% in view of the longer term emission reduction
objectives.
A detailed description of the baseline projections is presented in Annex 4.
6.2 Consistency with previous analytical work
A comparison was performed between different options for the CO2 targets for new cars
and vans considered for the period after 2020 in this impact assessment and under the
"EUCO30" scenario148
, which is underlying several Commission climate, energy and
transport policy proposals adopted in 2016. This scenario achieves the EU-wide 2030
targets regarding greenhouse gas emissions in the ESR sectors (a 30% reduction
compared to 2005), and regarding final energy demand (27% renewable energy and 30%
energy efficiency). The results are shown in Section 6.3.2.4.3 and in Annex 4.
148 The EUCO30 scenario is a key input to several Commission documents adopted in 2016: Impact
Assessment underpinning the Proposal for the Effort Sharing Regulation, Staff Working Document
accompanying the Communication on the low-emission mobility strategy, Impact Assessment
accompanying the proposal for recast of the Directive on the promotion of energy from renewable
sources, Impact Assessment accompanying the proposal for a revised Energy Efficiency Directive.
(https://ec.europa.eu/energy/sites/ener/files/documents/20170125_-
_technical_report_on_euco_scenarios_primes_corrected.pdf)
69
6.3 Emission targets: metric, level and timing
6.3.1 Metric for expressing the targets
6.3.1.1 Option TM_WTW: metric for setting the targets based on Well-to-Wheel
approach
The two main arguments most frequently used by stakeholders calling for a change from
the current tank-to-wheel (TTW) to a well-to-wheel (WTW) metric mainly relate to the
following aspects:
i. the need to account for the well-to-tank (WTT) emissions of electricity generation
in comparison with those from fossil fuels, in particular in a context where the
power sector is not yet fully decarbonised;
ii. the need to acknowledge the role of low-carbon fuels like bio-ethanol, bio-
methane or synthetic fuels produced from renewable electricity when setting
reduction targets for CO2 emissions from cars and vans in order to incentivise the
use of those fuels.
As regards the first argument, it needs to be remembered that greenhouse gas emissions
from the power and refinery sectors in the EU are already covered by the EU emissions
trading system (ETS). Furthermore, the power sector is also affected by measures to
attain the Renewable Energy target.
With respect to the second argument, the Commission's 2016 RED-II proposal149
sets
mandates on the fuels sector for 2030. This means that EU policy is already in place for
incentivising the deployment of renewable electricity and low-carbon fuels across all
sectors, including transport.
Thus, moving to a WTW metric would de facto constitute double regulation for the fuels
sector as well as the power sector. In the medium term, the impact of this double
regulation on the emissions from those sectors in combination with other EU ETS sectors
would likely be negligible as the total emissions of the EU ETS sectors are covered by a
cap that declines every year. In fact, power sector emissions are reducing at a faster rate
than that of any other sector. According to the projections based on the Reference
Scenario 2016, about 65% of electricity generated in the EU in 2030 will be carbon
free150
.
Projections taking into account newly proposed policies151
show a carbon free share of
more than 70%, and overall project a decrease of GHG intensity in the power sector of
around 40% between 2015 and 2030. With the continuation of the linear reduction factor
in the ETS beyond 2030, further reductions of the greenhouse gas intensity of the power
sector will be realised. The WTW emissions of electric vehicles in particular can
therefore be expected to reduce over time.
As the WTW emissions are not a property of the vehicle alone, it would be hard if not
impossible to establish metrics which are accurate, fair and cost-effective. In fact,
conventional powertrains are sufficiently flexible to use different fuel types within
certain specifications and therefore it is not possible to determine ex-ante for a given new
149 COM (2016) 767 final
150 https://ec.europa.eu/energy/sites/ener/files/documents/20160713%20draft_publication_ref2016_v13.pdf
151 https://ec.europa.eu/energy/sites/ener/files/documents/20170125_-
_technical_report_on_euco_scenarios_primes_corrected.pdf
70
vehicle on which fuels it will actually run or to which extent these would be low-carbon
fuels. PHEV and BEV will run on any form of electricity, no matter how it is produced,
with PHEV also capable of running on liquid fuels. Hence, uncertain ex-ante
assumptions would have to be used to account for the potential use of low-carbon fuels in
the metric expressing the CO2 emission performance.
Alternatively, some fuel producers propose to use an ex-post crediting approach for
based on actual fuel use and the respective GHG emission factors. While it is
theoretically possible to establish WTT factors for the many different fuels used in
vehicles152
, there are numerous practical barriers to overcome to actually agree on such
figures, which also vary geographically as well as over time. Lessons can be learned
from the discussions regarding the monitoring requirements for upstream emissions in
the context of the Fuel Quality Directive 98/70/EC (FQD), where stakeholder concerns
about large administrative burden contributed to the political decision not to insist on
detailed monitoring of emissions from well to tank and instead to discontinue regulating
CO2 in the FQD after 2020. Similarly, as in the implementation of the Renewables
Directive the issues of indirect land use change (ILUC) and the sustainability of imported
low-emission fuels would have to be addressed. For the WTW based CO2 targets, the
exact same issues would have to be faced, but in addition a discussion would be needed
regarding electricity.
Even in the case of an ex-post crediting system, highly uncertain ex-ante assumptions
would have to be made about the availability of such credits when setting new CO2
targets for cars in order to maintain a sufficient level of incentives for accelerating the
adoption of efficient and clean technologies in cars and vans.
As the actual emission reduction potential, the market availability and the penetration
rate of low-emission fuels falls outside the direct control of the automotive industry,
ACEA advocates maintaining the current tank-to-wheel metric.
Additional information on WTW emissions can be found in Annex 8.1.
6.3.1.2 Option TM_EMB: metric for setting the targets based on embedded emissions
Apart from the WTW emissions, which cover the use phase of the vehicle and the
production of the fuels used, there are also "embedded" CO2 emissions associated with
vehicle manufacturing (including the mining, processing and manufacturing of materials
and components), maintenance and disposal.
It is estimated that those embedded emissions currently cause around 16% of the total
lifetime CO2 emissions of EU cars153
. Additional information on embedded emissions
can be found in Annex 8.1.
152 See e.g. the reports published by the JEC research collaboration between the Commission's Joint
Research Centre , EUCAR (European Council for Automotive R&D) and CONCAWE (the Oil
Companies’ European Organisation for Environment, Health and Safety) -
http://iet.jrc.ec.europa.eu/about-jec/downloads
153 Ricardo-AEA and TEPR (2015), Evaluation of Regulations 443/2009 and 510/2011 on the reduction of
CO2 emissions from light-duty vehicles,
https://ec.europa.eu/clima/sites/clima/files/transport/vehicles/docs/evaluation_ldv_co2_regs_en.pdf;
TNO (2015): Energie- en milieu-aspecten van elektrische personenvoertuigen, TNO 2015 R10386,
http://publications.tno.nl/publication/34616575/gS20vf/TNO-2015-R10386.pdf; EEA (2016) Electric
vehicles in Europe, https://www.eea.europa.eu/publications/electric-vehicles-in-europe; studyCE Delft
and TNO (2017) Assessment of the Modalities for LDV CO2 Regulations beyond 2020, report for the
European Commission (DG CLIMA)
71
The evaluation study concluded that the further uptake of technologies improving the
fuel efficiency of conventional (internal combustion engine) vehicles would have a
limited impact on production emissions, and that the tailpipe CO2 emission savings
achieved through such measures would outweigh by far any additional production
emissions.
Nevertheless, it was also noted that the relative importance of embedded emissions may
increase in the long-term, in particular when the proportion of vehicles using alternative
powertrains is increasing.
A number of recent studies highlighted the potential emissions associated with the
production of batteries for electric vehicles. However, the emission factors calculated
vary significantly depending on the type of battery in terms of materials and energy
density and the source of energy used for its production154
. Furthermore, it is anticipated
that the significance of batteries in the overall carbon footprint of electric vehicles could
decrease very significantly due a number of factors, including the anticipated increase in
gravimetric energy density reducing the materials use per kWh, the reduced GHG
intensity of the power sector (see above) and materials used in battery manufacture,
improved recycling processes, and an extension of the battery lifetime. Improved overall
vehicle efficiencies would also contribute to this by reducing the size of the battery
needed for a given electric range. All of this would cause the GHG emissions from the
lifecycle of a BEV to drop by 40% between 2020 and 2030, in particular, if combined
with establishing a strong battery manufacturing base within the EU in the near future.
Another study155
highlighted the technical complexity of the issue, and the high
administrative burden of covering embedded emissions in a meaningful way. In addition,
trade policy issues might be raised as in the case of the emissions from fuels produced
from Canadian tar sands during the implementation of the FQD. Such highly complex
and detailed emission reporting would need to rely on life-cycle assessment (LCA)
reporting by manufacturers which would have to cover all relevant downstream
emissions from a huge number of suppliers of materials and car parts within the EU and
from third countries. Developing a meaningful and robust methodology with guidelines
and tools would be lengthy and costly.
Using a pre-described LCA approach that is sufficiently meaningful and providing the
right incentives for reducing the embedded emissions would not only be extremely
complex in terms of methodological approach, but would also be very difficult to
enforce.
If such a LCA methodology could not be established, fixed default values for including
embedded emissions in the metric would have to be used. However, this would have very
limited added value as it would just give incentives for reducing the amount of materials
used, but not take account of the differences between the emissions related to various
materials.
154 For example: M. Romare & L. Dahllöf IVL) (2017) The Life Cycle Energy Consumption and
Greenhouse Gas Emissions from Lithium-Ion Batteries; L. A.-W. Ellingsen et al. (2017) Identifying
key assumptions and differences in life cycle assessment studies of lithium-ion traction batteries with
focus on greenhouse gas emissions (Transportation Research Part D 55 (2017) 82–90); H.C. Kim et al.
(2016) Cradle-to-Gate Emissions from a Commercial Electric Vehicle Li-Ion Battery: A Comparative
Analysis (Environ. Sci. Technol. 2016, 50, 7715−7722)
155 CE Delft and TNO (2017) Assessment of the Modalities for LDV CO2 Regulations beyond 2020, report
for the European Commission (DG CLIMA)
72
In response to the public consultation, most car manufacturers were against covering
embedded emissions in the metric, while other stakeholder groups had diverging views.
The steel industry mentioned that the eco-innovation scheme should be complemented
with an LCA credit option.
For the reasons above, including embedded emissions in the metric in a meaningful way
is not deemed feasible with an effort proportionate to the expected benefits due to the
technical complexity of the issue and the prohibitively high cost of data collection at the
level of granularity required.
In the coming years, voluntary reporting on embedded emissions of the most relevant
segments along the supply chain and testing various methodological approaches could
offer further insights to manufacturers on the overall carbon footprint of car
manufacturing. This could be combined with regularly monitoring the progress made
with reducing the embedded emissions through dedicated studies.
6.3.1.3 Option TM_MIL: metric for setting the targets based on mileage weighting
Information on vehicle lifetime mileage was gathered in the context of two studies on
behalf of the Commission. A first one156
investigated differences in lifetime mileage
between vehicle categories. A follow-up study157
gathered additional data and analysed
the total mileages of vehicles of different ages with the aim of describing how annual
mileage varies and accumulates during the vehicle lifetime.
It was found that diesel cars on average run higher mileages than petrol cars, but no size-
related differences in mileage were identified for vans.
Introducing mileage-weighting when calculating the fleet-wide average emissions, by
weighting the CO2 emissions of each type of car by the distance typically travelled over
its lifetime, would impose a proportionately more stringent target on larger and heavier
vehicles. According to the findings of the study, this would in turn slightly reduce by 1.6-
1.8% the overall fleet-wide cost of achieving the same CO2 reduction.
A main challenge encountered during these studies was to find appropriately detailed
data at Member State level and important data gaps remain in this respect.
A more recent study158
, building on the aforementioned data, concluded that accounting
for different lifetime mileages would have a relatively limited impact on the
effectiveness, costs and competitiveness. Furthermore, it was highlighted that
establishing robust and broadly agreeable mileage numbers for different vehicle types
and categories depending on the utility value or other characteristics would be very
complicated.
In light of the above, there are a number of uncertainties around the feasibility of
establishing a robust mileage database to implement this option.
156 Data gathering and analysis to assess the impact of mileage on the cost effectiveness of the LDV CO2
Regulations. (Ricardo-AEA, report for the European Commission (2014))
157 Improvements to the definition of lifetime mileage of light duty vehicles (Ricardo-AEA, report for the
European Commission (2015))
158 CE Delft and TNO (2017) Assessment of the Modalities for LDV CO2 Regulations beyond 2020, report
for the European Commission (DG CLIMA)
73
6.3.2 Target levels for cars (TLC) and vans (TLV)
6.3.2.1 Introduction
As regards the CO2 emission performance of new passenger cars, due to the continuous
overall improvement of car technologies some autonomous improvement is expected to
occur under the baseline. On average, WLTP CO2 emissions in 2030 are estimated to be
14% lower than in 2021. For vans, a similar effect is seen, bringing down emission by
10% in 2030 compared to 2020. In fact, the improvements already captured in the
baselines TLC0 and TLV0 are very similar to the results of the options TLC10 and
TLV10. Therefore, there is no need to consider the latter options further.
Table 6 and Figure 10 show the impact of the remaining six target options on the
composition of the EU-wide fleet for passenger cars in 2025 and 2030.
At moderate target levels up to TLC30, the change in composition of the fleet will be
rather gradual compared to the baseline. For instance, with a 30 % target the share of
gasoline and diesel cars in 2030 will still make up almost three quarters of the total fleet,
compared to slightly more than 80% in the baseline. Only at the higher target levels, the
change would be more rapid. In the most ambitious scenario, the gasoline and diesel car
share would decline to a little more than 55%.
It should be noted that for option TLC20 the new fleet composition results in an over-
achievement of the CO2 target constraint. This is because for all policy options, the
introduction of the CO2 target constraint is assessed in the context of the broader policy
on low-emission mobility, i.e. in conjunction with enhanced availability of recharging
infrastructure and better user acceptance of advanced powertrains as higher mileage of
EVs reduces range anxiety. These factors result in an enhanced up take of more advanced
power trains. In combination with cost-beneficial improvements of ICEVs, this leads to a
situation that the 20% target is somewhat overachieved. This effect is also illustrated in
the results regarding final energy demand (section 6.3.2.2.1.4) and CO2 emission trends
over time (section 6.3.2.4.1), where the TLC20 results are somewhat optimistic, when
comparing the different policy options.
Table 6: Passenger car fleet powertrain composition (new cars) in 2025 and 2030
under different TLC options
2025 Gasoline Diesel
CNG LPG PHEV BEV FCEV Other ICEV HEV ICEV HEV
TLC0 27.3% 13.6% 36.3% 9.8% 1.7% 3.3% 4.8% 2.4% 0.4% 0.3%
TLC20 25.2% 13.8% 33.9% 9.6% 1.7% 3.5% 6.6% 4.1% 1.1% 0.5%
TLC25 24.9% 13.8% 33.6% 9.7% 1.7% 3.5% 6.9% 4.3% 1.1% 0.6%
TLC30 24.6% 13.8% 33.2% 9.8% 1.6% 3.6% 7.2% 4.4% 1.2% 0.6%
TLC40 22.4% 14.1% 31.6% 9.8% 1.6% 3.8% 9.1% 5.4% 1.5% 0.7%
TLC_EP40 20.1% 14.1% 30.0% 10.5% 1.5% 4.3% 10.7% 6.3% 1.7% 0.9%
TLC_EP50 19.4% 14.3% 29.3% 10.3% 1.5% 4.1% 11.6% 6.7% 1.9% 0.9%
74
2030 Gasoline Diesel
CNG LPG PHEV BEV FCEV Other ICEV HEV ICEV HEV
TLC0 23.8% 15.2% 33.5% 10.3% 1.8% 3.8% 6.7% 3.9% 0.7% 0.3%
TLC20 21.0% 15.6% 29.9% 9.9% 1.8% 3.9% 9.3% 6.4% 1.7% 0.6%
TLC25 20.4% 15.4% 29.1% 10.0% 1.8% 4.0% 10.0% 6.7% 1.8% 0.7%
TLC30 19.9% 15.3% 28.4% 10.1% 1.8% 4.1% 10.8% 7.1% 1.9% 0.7%
TLC40 16.7% 14.6% 24.4% 9.6% 1.6% 4.2% 15.7% 9.7% 2.6% 1.0%
TLC_EP40 15.7% 14.4% 22.9% 9.5% 1.5% 4.1% 17.4% 10.7% 2.8% 1.1%
TLC_EP50 13.3% 12.8% 20.1% 9.1% 1.4% 3.9% 22.1% 13.0% 3.3% 1.0%
Figure 10: Passenger car fleet powertrain composition (new cars) in 2025 and 2030
under different TLC options
Table 7 and Figure 11 show the impact of different target level options on the
composition of the EU-wide fleet of new vans in 2025 and 2030. This shows that for
vans the change would be a little less pronounced than for cars. Under the 30% target, in
2030 almost four fifths of the vans would still be equipped with a more efficient
combustion engine. At the highest level of ambition considered, this share would fall to a
little less than 55%.
Table 7: Van fleet powertrain composition (new vans) in 2025 and 2030 under
different TLV options
2025 Gasoline Diesel
CNG LPG PHEV BEV FCEV ICEV HEV ICEV HEV
TLV0 2.2% 1.5% 57.3% 32.2% 0.2% 0.1% 4.7% 1.7% 0.1%
TLV20 2.1% 1.7% 53.4% 31.9% 0.2% 0.1% 8.1% 2.0% 0.5%
TLV25 2.1% 1.7% 53.7% 30.7% 0.2% 0.1% 8.8% 2.2% 0.5%
TLV30 2.1% 2.0% 54.4% 31.0% 0.2% 0.2% 7.7% 2.2% 0.4%
TLV40 1.9% 2.0% 49.3% 30.0% 0.2% 0.2% 12.8% 3.0% 0.7%
TLV_EP40 1.8% 1.3% 47.6% 29.1% 0.1% 0.3% 15.5% 3.5% 0.8%
TLV_EP50 1.7% 1.3% 44.1% 27.5% 0.1% 0.3% 19.9% 4.1% 1.0%
75
2030 Gasoline Diesel
CNG LPG PHEV BEV FCEV ICEV HEV ICEV HEV
TLV0 2.0% 1.5% 53.2% 32.1% 0.2% 0.2% 7.9% 2.7% 0.2%
TLV20 1.9% 1.5% 48.6% 30.1% 0.2% 0.2% 14.0% 2.7% 0.8%
TLV25 1.9% 1.4% 47.5% 30.0% 0.2% 0.2% 15.0% 2.9% 0.9%
TLV30 1.8% 1.4% 45.6% 29.3% 0.2% 0.2% 17.3% 3.2% 1.0%
TLV40 1.6% 1.2% 40.4% 26.0% 0.2% 0.3% 24.8% 4.2% 1.3%
TLV_EP40 1.6% 1.2% 41.7% 24.9% 0.2% 0.3% 24.6% 4.2% 1.3%
TLV_EP50 1.3% 1.0% 32.5% 19.9% 0.1% 0.2% 37.6% 5.6% 1.9%
Figure 11: Van fleet powertrain composition (new vans) in 2025 and 2030 under
different TLV options
6.3.2.2 Economic impacts (including employment)
In this section the following impacts are considered:
(i) Net economic savings from different perspectives
(ii) Energy system impacts
(iii) Macro-economic impacts, including employment
Net economic savings taking different perspectives
The direct economic impacts of the abovementioned options have been assessed by
considering the changes (compared to the baseline) in capital costs, fuel costs159
, and
operating and maintenance (O&M) costs for an "average" new vehicle (car or van),
registered in 2025 or in 2030.
159 The fuel costs are calculated taking into account the cost of electricity consumed in the electrically
rechargeable vehicles. Both for the baseline and the different policy options the electricity prices as
projected in the Reference Scenario 2016 are used.
76
An "average" new vehicle of a given year is defined by averaging the contributions of the
different segments of small, medium, large vehicles and powertrains by weighting them
according to their market penetration as estimated. The PRIMES-TREMOVE model
projects the new fleet composition in a given year as a result of the need to comply with
the requirements of the new policy. Therefore, the different policy options lead to
different projected fleet compositions, characterised by different shares of powertrain
types (diesel, gasoline, battery electric, plug-in hybrids, etc.) in the different market
segments. The net savings for an "average" vehicle are calculated by averaging the costs
and savings of the different powertrain types and segments, using the projected shares as
weights. Since these shares change among the different scenarios, and they change for
the new vehicles of 2025 and those of 2030, the cost indicators are used to represent the
economic impacts for the new fleet of 2025 and 2030.
For this analysis, the following indicators have been used:
Net economic savings over the vehicle lifetime from a societal perspective
This parameter reflects the change in costs over the lifetime of 15 years of an
"average" new vehicle without considering taxes and using a discount rate of 4%.
Net savings from an end-user perspective, using two different indicators:
o Total Cost of Ownership (TCO) over the vehicle lifetime (TCO-15 years)
This parameter reflects the change in costs over the lifetime of 15 years of an
"average" new vehicle. In this case, given the end-user perspective, taxes are included
and a discount rate of 11% for cars or 9.5% for vans160
is used.
o TCO for the first user, i.e. net savings during the first five years after
registration (TCO-first user):
This parameter reflects the change in costs, during the first five years of use, i.e. the
average time the first buyer is using the vehicle. Again, taxes are included and a
discount rate of 11% for cars or 9.5% for vans is used. The calculation also takes
account of the residual value of the vehicle and the technology added with
depreciation.
Sensitivities
As explained in Section 6.1, apart from the cost curves based on the "Medium"
technology cost estimates, a number of other cost-curves were developed as part of a
sensitivity analysis. While the overall economic analysis of the policy options (TLC and
TLV) relies on the use of the Medium costs, some sensitivities were run to investigate the
effect on the net costs (savings) in case technology costs would decrease faster than
anticipated under the Medium cost case. This additional assessment also allows looking
into a situation where costs evolve differently for different powertrain types. This is
particularly relevant for EV in view of the importance of the battery cell costs and the
higher uncertainty over how these costs will evolve in the future very much depending on
market penetration.
Two other sensitivities explored are related to the future oil price and to the evolution of
the share of diesel cars in the fleet.
160 https://ec.europa.eu/energy/sites/ener/files/documents/20160713%20draft_publication_ref2016_v13.pdf
77
Energy system impacts
In view of the close link between the LDV CO2 standards and energy use in the transport
and fuel sectors, the energy system impacts have been analysed, considering the final
energy demand, the final energy demand by energy source and the impact on the
electricity system.
Macro-economic impacts
The broader macro-economic impacts of the different TL options have been analysed for
the LDV sector (passenger cars and vans) as a whole. Therefore, the results are presented
for cars and vans together in Section 6.3.2.2.3.
While the below Sections provide an overview of the main findings of the assessment
and some illustrative tables and figures, the detailed results of the calculations of the net
savings and their components are given in Annex 8.
6.3.2.2.1 Passenger cars (TLC)
6.3.2.2.1.1 Net economic savings over the vehicle lifetime from a societal perspective
Table 8 and Figure 12 show the net savings (EUR per vehicle, expressed as the
difference with the baseline) over the vehicle lifetime from a societal perspective for an
average new passenger car registered in 2025 and in 2030 under the different TLC
options. The net savings observed are the result of differences in capital costs, fuel cost
savings and O&M costs.
Capital costs – which in this case are equal to manufacturing costs - increase with stricter
fleet-wide CO2 target levels as reducing CO2 emissions will require additional more
expensive technologies to be implemented. For a car registered in 2025, the average
additional capital cost ranges from 115 EUR (TLC20) to 1,411 EUR (TLC_EP40). In
2030, it ranges from 419 EUR (TLC20) to 2,752 EUR (TLC_EP50) per car.
At the same time, stricter targets will lower fuel costs as the fuel efficiency of the cars
improves and more alternative powertrains are deployed, both measures reducing the
amount of fuel consumed. Fuel cost savings per car range from 354 EUR (TLC20) to
1,394 EUR (TLC_EP40) in 2025 and from 1,159 EUR (TLC20) to 2,558 EUR
(TLC_EP50) in 2030.
O&M costs show little variation between the different options, as they depend on the
insurance and maintenance costs for the different segments and powertrains which
compose the PRIMES-TREMOVE optimised fleet.
Both in 2025 and in 2030, net savings occur for options TLC20, TLC25, TLC30 and
TLC40, ranging from 78 EUR (TLC40) to 152 EUR (TLC30) per car in 2025 and from
565 EUR (TLC40) to 902 EUR (TLC25) per car in 2030. Option TLC_EP40 results in
net savings in 2030 (512 EUR per car), but not in 2025 (net costs of 42 EUR per car)
while under option TLC_EP50 net savings are just below zero in both 2025 and 2030.
As can be seen from Table 8 and Figure 12, the highest net savings can be realised with
options TLC25 and TLC30 in both 2025 and 2030.
78
Table 8: Net economic savings over the vehicle lifetime from a societal perspective
in 2025 and 2030 (EUR/car)
2025 (EUR/car) TLC20 TLC25 TLC30 TLC40 TLC_EP40 TLC_EP50
Capital cost [1] 115 229 380 747 1,411 1,193
O&M cost [2] 139 139 130 96 25 22
Fuel cost savings [3] 354 514 661 922 1,394 1,198
Net savings
[3]-[1]-[2]
100 147 152 78 -42 -17
2030 (EUR/car) TLC20 TLC25 TLC30 TLC40 TLC_EP40 TLC_EP50
Capital cost [1] 419 679 1,020 1,812 1,861 2,752
O&M cost [2] -62 -62 -96 -157 -168 -192
Fuel cost savings [3] 1,159 1,520 1,802 2,220 2,214 2,558
Net savings
[3]-[1]-[2]
802 902 878 565 521 -2
Figure 12: Net economic savings over the vehicle lifetime from a societal perspective
in 2025 and 2030 (EUR/car)
In principle, in order to estimate the net economic savings over the vehicle lifetime from
a societal perspective, one should include also the external benefits (or avoided external
costs). For the options assessed here, the most important effect concerns additional
benefits in terms of avoided CO2 costs over the lifetime of a vehicle as compared to a
baseline vehicle.
79
Table 10 gives an overview of the estimated additional avoided CO2 costs for cars in
2030 for the different options assessed161
. It shows that these external benefits increase as
the CO2 target gets stricter.
Table 10: Avoided CO2 cost (EUR/car) over a car's lifetime
(EUR/car) TLC20 TLC25 TLC30 TLC40 TLC_EP40 TLC_EP50
Avoided CO2 cost 303 375 451 593 609 728
6.3.2.2.1.2 TCO-15 years (vehicle lifetime)
Figure 13 shows the TCO over 15 years (EUR per car) of an average new passenger car
registered in 2025 and in 2030 under the different TLC options (expressed as the
difference with the baseline).
It shows that in both years and under all options considered there are net savings for the
end-users over 15 years. The savings per car in 2025 range from 253 EUR (TLC_EP40)
to 436 EUR (TLC30) and they increase in 2030, ranging from 389 EUR (TLC_EP50) to
1,374 EUR (TLC25).
The highest net savings for the total cost of ownership over 15 years can be realised with
a CO2 target as in options TLC25 or TLC30.
Figure 13: TCO-15 years (vehicle lifetime) (net savings in EUR/car in 2025 and
2030)
6.3.2.2.1.3 TCO-first user (5 years)
Figure 14 shows the net savings (EUR per car) from a first end-user perspective for an
average new passenger car registered in 2025 and in 2030 under the different TLC
options (expressed as the difference with the baseline).
161 The avoided CO2 cost is based on the Update of the External Costs of Transport, with a value of 70
€/tonCO2 for external costs of climate change, averaged over the period 2030-2045
(https://ec.europa.eu/transport/sites/transport/files/themes/sustainable/studies/doc/2014-handbook-
external-costs-transport.pdf)
80
The trends seen are very similar to those found for the analysis from a societal
perspective (see above).
Capital costs increase as the fleet-wide CO2 target levels get stricter and range from 90
EUR (TLC20) to 1,104 EUR (TLC_EP40) for the average car registered in 2025. In
2030, they range from 328 EUR (TLC20) to 2,154 EUR (TLC_EP50) per car.
At the same time, stricter targets will lower fuel costs and fuel cost savings per car range
from 348 EUR (TLC20) to 1,286 EUR (TLC_EP40) in 2025 and from 1,025 EUR
(TLC20) to 2,354 EUR (TLC_EP50) in 2030.
O&M costs show little variation between the different options and are generally positive
in 2025 and negative (i.e. lower than under the baseline) in 2030.
For the first user, both in 2025 and in 2030, net savings occur under all options
considered, ranging from 171 EUR (TLC_EP40) to 263 EUR (TLC30) per car in 2025
and from 282 EUR (TLC_EP50) to 818 EUR (TLC30) per car in 2030.
The results of the following two sensitivities are given in Annex 8.2:
(i) sensitivity regarding the effect of varying cost assumptions;
(ii) sensitivity regarding the effect of a varying international oil price.
Figure 14: TCO-first user (5 years) (net savings in EUR/car in 2025 and 2030)
6.3.2.2.1.4 Energy system impacts
Figure 15 shows the impact of the different TLC options on the final energy demand for
passenger cars over the period 2020-2040.
Under the baseline (TLC 0), the final energy demand for passenger cars is 170,300 ktoe
in 2020 and it decreases over time as cars being subject to the CO2 targets set in the
current Cars Regulation enter the fleet. In 2030, the final energy demand for passenger
cars is 13% lower than in 2020, and the effect of the current targets continues afterwards,
i.e. in 2040 final energy demand is 16% lower than in 2020).
Under the different policy options regarding the CO2 target level, the final energy
demand for cars reduces further, and the effects of more stringent CO2 targets become
81
more outspoken from 2030 on as more and more cars which are subject to those targets
enter the fleet.
The EU-wide fleet targets for CO2 also affect the composition of the car fleet in terms of
the powertrains used and hence have an impact on the demand per type of energy source
in the transport sector.
Figure 16 shows the share of different fuel types used in the entire passenger car fleet
(i.e. not only the newly registered cars) in 2025 and 2030. Diesel and gasoline by far
remain the main fuels used in 2025 and 2030. Even for the most ambitious target level,
there is only a gradual shift away from fossil to alternative fuels, in particular electricity
and hydrogen. The shift is more outspoken in 2030 and for the options with more
stringent CO2 targets. For the other fuel types (biogasoline, biodiesel, gaseous fuel), there
are very limited changes amongst the different options considered.
Figure 15: Final energy demand (ktoe) for passenger cars over the period 2020-2040
under different TLC options
82
Figure 16: Share (%) of different fuel types in the final energy demand for cars
(entire fleet) under different TLC options - 2025 and 2030
Electricity consumption
Table 9 shows the share of the total EU-28 electricity consumption used by cars and vans
(together) in 2025 and 2030 for different CO2 target level options. It illustrates that, even
with the strictest targets considered, the share of electricity used by light-duty vehicles up
to 2030 is not more than a few percent.
83
Table 9: Electricity consumption by cars and vans with respect to total electricity
consumption (EU-28) under different options for the EU-wide CO2 target levels
Options for the EU-wide CO2 target level
Share of cars and vans in total
electricity consumption
cars vans 2025 2030
TLC20 TLV20 0.5% 1.2%
TLC30 TLV25 0.5% 1.3%
TLC40 TLV40 0.5% 1.7%
TLC_EP50 TLV_EP50 0.6% 2.2%
Diesel and gasoline demand
Table 10 shows the cumulative savings of diesel and gasoline in the period 2020 to 2040
with respect to the baseline for different scenarios. Considering the combination of
options TLC30 and TLV40, the cumulative savings between 2020 and 2040 are
equivalent to around 150 billion euros at current oil prices
Table 10: Cumulative diesel and gasoline savings (Mboe) over the period 2020 to
2040 under different policy options with respect to the baseline
cars (Mboe) vans (Mboe)
TLC20 1,881 TLV20 485
TLC30 2,136 TLV25 505
TLC40 2,864 TLV40 719
TLC_EP40 3,283 TLV_EP40 753
TLC_EP50 3,658 TLV_EP50 933
Sensitivity – effect of decreasing share of diesel cars
In view of recent developments following the diesel emission scandal and the persistent
air quality issues in a number of cities across the EU, the share of diesel cars in the fleet
of newly sold cars has declined in a number of EU Member States162
.In order to assess
the potential effects, two sensitivities were designed with lower diesel car fleet shares, as
shown in Table 11.
Table 11: Share of diesel cars (incl. diesel hybrids) in the new car fleet under the
two "Low Diesel" sensitivities - % reduction compared to the baseline
Scenario Car segment 2025 2030
Diesel_1
Small 20% 40%
Medium 15% 30%
Large 15% 30%
162 ICCT (2017): Cities driving diesel out of the European car market,
http://www.theicct.org/blogs/staff/cities-driving-diesel-out-european-car-market
84
Diesel_2
Small 40% 80%
Medium 30% 60%
Large 30% 60%
The resulting fleet composition under these two sensitivities is shown in Table 12,
compared with the fleet composition in case of TLC25 and TLC30. It makes clear that
diesel cars are largely substituted by gasoline cars with rather limited increases in PHEV,
BEV and other (gaseous fuel) cars.
Table 12: Passenger car fleet composition in 2025 and 2030 under the "Low Diesel"
sensitivities compared to options TLC25 and TLC30
2025 diesel gasoline PHEV BEV FCEV other
TLC25 43% 39% 7% 4% 1% 6%
TLC30 43% 38% 7% 4% 1% 6%
Diesel_1 37% 43% 8% 5% 1% 6%
Diesel_2 29% 49% 8% 5% 1% 7%
2030 diesel gasoline PHEV BEV FCEV other
TLC25 39% 36% 10% 7% 2% 6%
TLC30 39% 35% 11% 7% 2% 7%
Diesel_1 28% 43% 12% 7% 2% 7%
Diesel_2 13% 55% 13% 8% 2% 9%
Table 13 shows the resulting tailpipe CO2 emission reductions for cars between 2025 and
2040, taking 2005 as the reference year, under the "Low Diesel" scenarios in conjunction
with the EU-wide fleet CO2 target of option TLC30. It shows that the impact of the
declining diesel share is limited. CO2 is reduced only slightly less than under option
TLC30 when using the initial fleet composition. This is due to the modelled gap between
test cycle and real-world emissions, which is slightly lower for diesel cars compared to
gasoline cars. Therefore, a declining share of diesel cars leads to a small overall increase
in the gap between type approval and real world emissions, hence a lower emissions
reduction.
Table 13: (Tailpipe) CO2 emissions of passenger cars in EU-28 - % reduction
compared to 2005
2025 2030 2035 2040
TLC30 22.0% 31.0% 41.3% 51.5%
Diesel_1 21.9% 30.5% 40.8% 50.6%
Diesel_2 21.9% 30.1% 40.1% 49.2%
In terms of economic impacts, the three tables below show that net savings from a
societal perspective, vehicle lifetime perspective and first-user perspective decrease as
diesel shares are declining. This is mainly due to a decrease in the fuel savings when the
market shares of diesel car decrease. However, from any of the three perspectives there
will still be significant net savings, especially when approaching 2030.
85
Table 14: Net economic savings from a societal perspective (EUR/car)
TLC30 Diesel_1 (TLC30) Diesel_2 (TLC30)
2025 154 77 34
2030 876 808 805
TLC25 Diesel_1 (TLC25) Diesel_2 (TLC25)
2025 147 25 -47
2030 902 758 749
Table 15: TCO– lifetime (15 years) – net savings in EUR/car
TLC30 Diesel_1 (TLC30) Diesel_2 (TLC30)
2025 438 251 51
2030 1,359 1,133 908
TLC25 Diesel_1 (TLC25) Diesel_2 (TLC25)
2025 413 170 -19
2030 1,374 1,038 739
Table 16: TCO- first user (5 years) – net savings in EUR/car
TLC30 Diesel_1 (TLC30) Diesel_2 (TLC30)
2025 263 149 23
2030 818 673 505
6.3.2.2.2 Light commercial vehicles (TLV)
6.3.2.2.2.1 Net economic savings over the vehicle lifetime from a societal perspective
Table 17 and Figure 17 show the net savings over the vehicle lifetime from a societal
perspective for an average new van registered in 2025 and in 2030 under the different
TLV options (expressed as the difference with the baseline).
Capital costs – which in this case equal manufacturing costs - increase with stricter EU-
wide fleet CO2 target levels as reducing CO2 emissions will require additional more
expensive technologies to be implemented. For a new van registered in 2025, the average
additional capital cost ranges from 232 EUR (TLV20) to 1,469 EUR (TLV_EP50). In
2030 (when stricter targets apply), it ranges from 426 EUR (TLV20) to 2,439 EUR
(TLV_EP50) per van.
At the same time, stricter targets will lower fuel costs and fuel cost savings per van range
from 1,002 EUR (TLV20) to 2,529 EUR (TLV_EP40) in 2025 and from 2,063 EUR
(TLV20) to 4,261 EUR (TLV_EP50) in 2030.
O&M costs show little variation between the different options, apart from TLV_EP50,
where these costs are significantly lowered in 2030.
Both in 2025 and in 2030, net savings occur under all options, ranging from 810
(TLV20) to 1,369 EUR (TLV_EP40) per van in 2025 and from 1,687 EUR (TLV20) to
2,386 EUR (TLV40) per van in 2030.
86
Overall, net savings for vans are significantly higher than for cars under options with
similar emission target reduction percentages due to the much higher fuel cost savings
achieved as vans start reducing from a significantly higher CO2 efficiency standard.
Importantly, the highest benefits occur at target levels of 30% and 40% in 2030. This
could help improving the competitiveness of many SMEs.
Table 17: Net economic savings over the vehicle lifetime from a societal perspective
in 2025 and 2030 (EUR/van)
2025 TLV20 TLV25 TLV30 TLV40 TLV_EP40 TLV_EP50
Capital cost [1] 232 355 393 877 1,251 1,469
O&M cost [2] -40 -52 -58 -106 -91 -119
Fuel cost savings
[3]
1,002 1,265 1,685 2,061 2,529 2,316
Net savings [3-1-2] 810 962 1,350 1,290 1,369 967
2030 TLV20 TLV25 TLV30 TLV40 TLV_EP
40
TLV_EP50
Capital cost [1] 426 620 891 1,582 1,415 2,439
O&M cost [2] -50 -55 -75 -142 -141 -239
Fuel cost savings [3] 2,063 2,600 3,064 3,827 3,341 4,261
Net savings [3-1-2] 1,687 2,036 2,247 2,386 2,067 2,060
Figure 17: Net economic savings over the vehicle lifetime from a societal perspective
in 2025 and 2030 (EUR/van)
In principle, in order to estimate the net economic savings over the vehicle lifetime from
a societal perspective, one should include also the external benefits (or avoided external
costs). For the options assessed here, the most important effect concerns additional
87
benefits in terms of avoided CO2 costs over the lifetime of a vehicle as compared to a
baseline vehicle.
Table 18 gives an overview of the estimated additional avoided CO2 costs for vans in
2030 for the different options assessed163
. It shows that these external benefits increase as
the CO2 target gets stricter.
Table 18: Avoided CO2 costs over a van's lifetime
(EUR/van) TLV20 TLV25 TLV30 TLV40 TLV_EP40 TLV_EP50
Avoided CO2 cost 521 649 774 1,000 898 1,212
6.3.2.2.2.2 TCO-15 years (vehicle lifetime)
Figure 18 shows the net savings in the total cost of ownership of an average new van
registered in 2025 and in 2030 under the different options expressed as the difference
with the baseline.
It shows that under all options considered there are net savings for the end-users over 15
years. The savings per van range from 1,382 EUR (TLV20) to 2,521 EUR (TLV_EP40)
in 2025 and further increase in 2030, ranging from 2,765 EUR (TLV20) to about 4,400
EUR (TLV_EP50 and TLV40). The highest benefits occur at 30%, 40% and even 50%
target reduction levels.
Figure 18: TCO-15 years (vehicle lifetime) in 2025 and 2030 (net savings in
EUR/van)
163 The avoided CO2 cost is based on the Update of the External Costs of Transport, with a value of 70
€/tonCO2 for external costs of climate change, averaged over the period 2030-2045
(https://ec.europa.eu/transport/sites/transport/files/themes/sustainable/studies/doc/2014-handbook-
external-costs-transport.pdf)
88
6.3.2.2.2.3 TCO-first user (5 years)
Figure 19 shows the net savings from a first end-user perspective for an average new van
registered in 2025 and in 2030 under the different TLV options (expressed as the
difference with the baseline).
The trends are very similar to those found for the analysis from a societal perspective
(see section 6.3.2.2.2.1). Capital costs increase as the fleet-wide CO2 target levels get
stricter and range from 144 EUR (TLV20) to 913 EUR (TLV_EP50) for an average van
registered in 2025. In 2030, they range from 265 EUR (TLV20) to 1,516 EUR
(TLV_EP50) per van.
At the same time, stricter targets will lower fuel costs for the end-user and fuel cost
savings per van range from 1,016 EUR (TLV20) to 2,614 EUR (TLV_EP40) in 2025 and
from 2,026 EUR (TLV20) to 4,412 EUR (TLV_EP50) in 2030.
O&M costs show relatively little variation between the different options and are always
negative (i.e. lower than under the baseline).
As a result, both in 2025 and in 2030, the first user benefits from significant net savings
under all options considered, ranging from 889 EUR (TLV20) to 1,702 EUR
(TLV_EP40) per van in 2025 and from 1,783 EUR (TLV20) to 3,000 EUR (TLV_EP50)
per van in 2030. The highest net benefits will be achieved at the higher end of the
reduction targets.
Figure 19: TCO-first user (5 years) in 2025 and 2030 (net savings in EUR/van)
Light commercial vehicles are predominantly used by businesses, particularly SMEs. The
total cost of ownership is therefore of particular importance for these companies. The
above calculations show that SMEs could benefit from significant net savings both over
the first five years of ownership as well as over the entire vehicle's lifetime.
The results of the following two sensitivities are given in Annex 8:
(i) sensitivity regarding the effect of varying cost assumptions;
(ii) sensitivity regarding the effect of a varying international oil price.
89
Energy system impacts
Figure 20 shows the impact of the different van CO2 target level options on the final
energy demand for vans over the period 2020-2040.
Under the baseline (TLV 0), the final energy demand for vans is 35,700 ktoe in 2020 and
it decreases over time as new vans, which are subject to the CO2 target set in the current
Vans Regulation, enter the fleet. In 2030, the final energy demand for vans is estimated
to be 6% lower than in 2020, but the effect of the current CO2 target decreases
afterwards. In 2040 final energy demand is 8% lower than in 2020.
Under the different TLV policy options, the final energy demand for vans is significantly
lower compared to the baseline. The effects of more stringent CO2 targets becomes even
more pronounced from 2030 onward as more and more new vans which are subject to
those targets enter the fleet.
Figure 20: Final energy demand (ktoe) for vans over the period 2020-2040 under
different TLV options
The EU-wide fleet targets for CO2 also affect the composition of the new van fleet in
terms of the powertrains used and hence have an impact on the demand per type of
energy source.
Figure 21 shows the share of different fuel types used in the entire van fleet, i.e. not only
the newly registered vans, in 2025 and 2030. This indicates that diesel remains by far the
main fuel used for vans in 2025 and 2030, there is quite a limited shift away from fossil
to alternative fuels, in particular electricity. The shift is slightly more significant in 2030
and for more stringent CO2 targets. For the other fuel types gasoline, bio-gasoline,
biodiesel, and gaseous fuels, there are very limited changes amongst the different options
considered. It illustrates that because of the limited overall turnover rate of vans even
high sales targets will only lead to gradual changes in the demand for different fuels in
2025 and 2030.
The share of cars and vans in the total EU-28 electricity consumption is shown in Table 9
(Section 6.3.2.2.1.4).
90
Figure 21: Share (%) of different fuel types in the final energy demand for vans
(entire fleet) under different TLV options –2025 and 2030
91
6.3.2.2.3 Macro economic impacts, including employment
6.3.2.2.3.1 Introduction and methodological considerations
The E3ME and GEM-E3 models are used to assess macroeconomic and sectoral
economic impacts (see Annex 4 for a detailed description). In particular, these models
are used to quantify the impacts of the different CO2 targets for light-duty vehicles on the
wider economy, i.e. GDP, sectoral output and employment.
Table 19 shows the options for the target levels which were considered in the scenarios
modelled by E3ME and GEM-E3. The macro-economic impacts of a combination TL25
(combining TLC25 and TLV25) would be very similar to those of the modelled scenario
TL30c/25v.
Table 19: Scenarios modelled with E3ME and GEM-E3 for assessing the macro-
economic impacts of the TLC and TLV options
E3ME and GEM-E3
scenario
Cars target level option Vans target level option
Baseline (TL0) TLC0 TLV0
TL20 TLC20 TLV20
TL30c/25v TLC30 TLV25
TL40 TLC40 TLV40
All the modelled scenarios estimate changes due to the new CO2 target levels in order to
isolate the macroeconomic effects of this specific policy. In all scenarios, government
revenue neutrality is imposed. The implementation of the new CO2 targets reduces petrol
and diesel consumption, which are commodities upon which taxes are levied in all
Member States. This is compensated, in all scenarios, by a proportional increase of VAT
rates. As an example, in the scenario TLC30c/25v modelled through E3ME, it is
projected that fuel duty revenues in the EU28 decrease by around 6,000 million euros in
2030, corresponding to a 5% decrease with respect to the baseline. The fuel duty revenue
loss represents around 0.04% of the EU28 GDP. To ensure revenue neutrality, VAT total
revenues increase by around 0.3% in 2030.
6.3.2.2.3.2 GDP impacts
E3ME modelling results for GDP
Table 20 shows the projected GDP impact for the EU-28 for the three scenarios
compared against the baseline. The results shown are based on the assumption that the
battery cells used in electric vehicles are imported from third countries. Further analysis
regarding the impacts of the production of battery cells in the EU is presented in Section
6.5.4.
Table 20: GDP impacts in the baseline (million euros) and percentage change from
the baseline under the policy scenarios – battery cells imported (E3ME results)
Scenario 2025 2030 2035 2040
Baseline (M€) 16,018,660 17,087,725 18,381,955 19,892,587
TL20 0.00% 0.01% 0.02% 0.03%
TL30c/25v 0.00% 0.02% 0.03% 0.05%
92
TL40 -0.01% 0.02% 0.05% 0.07%
The results show compared to the baseline a very small positive impact of the three
policy scenarios on EU-28 GDP from 2030 onwards. It is projected that with tighter CO2
targets for LDV slightly increased consumer expenditure as well as increased
infrastructure investment would be triggered. Together with a reduction in imports of
petroleum products, this would result in an overall small positive impact on GDP.
At the sectoral level, there would be an expansion of the automotive supply chain, with a
production increase in sectors such as rubber and plastics, metals and electrical and
machinery equipment. This reflects the impact of increased demand for batteries and
electric motors.
The automotive sector itself would see a decrease in value added due to the decreasing
use of combustion engines in cars. Similarly, the power and hydrogen supply sectors
would increase production reflecting increased demand for electricity and hydrogen to
power EVs, while the petroleum refining sector would see losses. With higher target
levels, these effects would become slightly more pronounced.
Table 21 shows the main impacts on the output within the most affected sectors in 2030
for the different scenarios. The other sectors overall see smaller but positive impacts due
to the projected increased overall economic output.
Table 21: Impacts on the output within the most affected sectors in 2030 (million
euros) and percentage change from the baseline – battery cells imported (E3ME
results)
Sector Baseline (M€) TL20 TL30c/25v TL40
Petroleum refining 410,422 -0.9% -1.1% -1.7%
Automotive 1,076,972 0.0% -0.1% -0.5%
Rubber and plastics 317,932 0.3% 0.4% 0.4%
Metals 1,044,999 0.3% 0.3% 0.4%
Electrical equipment 1,091,185 0.7% 0.9% 1.7%
Electricity, gas, water, etc 1,124,221 0.2% 0.3% 0.5%
GEM-E3 modelling results for GDP
GEM-E3 is a general equilibrium model. It therefore assumes that the economy is in
perfect equilibrium, with no spare capacity that, if used, would boost economic output.
Capital resources are fully employed in the economy. This has consequences when
introducing policy changes, with GEM-E3 typically seeing crowding out effects of
investments. A policy intervention to increase investments in a particular sector, for
instance road transport therefore limits capital availability for other sectors.
The model was run using two variants: a "self-financing" variant where businesses and
households finance their investments in more efficient vehicles by spending less on other
items; a "loan-based" variant where businesses and households receive a 10-year loan
(2% real interest rate) that is fully paid back within this period to purchase more efficient
vehicles.
Table 22 shows the GDP impact of scenario TL30c/25v, for the two financing schemes,
in terms of percentage changes with respect to the baseline. In the self-financing variant,
the crowding out effect is dominant and the impact is marginally negative.
93
The loan-based variant presents a slightly positive effect that diminishes over time as the
investment and expenditure for new advanced vehicles is reduced and loans start to be
paid back. In this case, in the short term, the slightly positive impacts are mostly driven
by the additional investments. The possibility for firms and households to finance their
purchases through loans stimulates demand without crowding out other investments.
Over time, as the stock of more efficient vehicles builds up, the impact from fuel savings
becomes gradually more important.
Table 22: GDP impacts in the baseline (million euros) and percentage change from
the baseline under scenario TL30c/25v comparing the self-financing and loan-based
variants – battery cells manufactured in the EU (GEM-E3 results)
2025 2030 2035 2040
TL0 (Baseline) 15,564,081 16,654,923 17,941,843 19,388,241
TL30c/25v self-financing -0.014% -0.014% -0.024% -0.040%
TL30c/25v loan-based 0.016% 0.053% 0.066% 0.041%
The GDP impacts for the other scenarios assessed are similar. Table 23 presents the GDP
impact for the scenarios TL20, TL30c/25v and TL40 in terms of changes with respect to
the baseline, in the loan-based variant. The positive impact tends to be slightly higher for
the scenarios with tighter CO2 target, where higher expenditures for more efficient
vehicles, financed by loans, increase GDP.
Table 23: GDP impacts in the baseline (million euros) and percentage change from
the baseline under the policy scenarios - loan-based variant – battery cells
manufactured in the EU (GEM-E3 results)
2025 2030 2035 2040
TL0 (Baseline) 15,564,081 16,654,923 17,941,843 19,388,241
TL20 loan-based 0.015% 0.045% 0.044% 0.021%
TL30c/25v loan-based 0.016% 0.053% 0.066% 0.041%
TL40 loan-based 0.021% 0.110% 0.169% 0.108%
Vehicles manufacturing, electrical equipment manufacturing164
, fossil fuels production
and power generation are the most impacted sectors. Table 24 shows the sectoral results
in percentage changes with respect to the baseline. Starting from quite a low baseline, the
increases in manufacturing of electric vehicles are expected to be quite significant
ranging between 40-50% at 20%, 50-60% at 30%, and 90-165% at the 40% CO2 target
levels. Still, as already seen earlier in the change of the composition of the overall fleet,
the impact on the manufacturing of conventional vehicles would be limited at 20 % and
30% CO2 target levels. Even at 40% CO2 target, production would still be reduced by
less than 6 % in 2030. Similarly, fossil fuel production is only slightly affected up to
2040, while at the same time production of electrical equipment and electricity would
increase slightly.
164 In the present version of GEM-E3 the manufacturing of batteries is not represented as a separate sector
but it is assumed to be part of the electrical equipment sector.
94
Table 24: EU-28 production by sector in the baseline (million euros) and percentage
change from the baseline under the policy scenarios (GEM-E3 results)
Sectors Scenario 2025 2030 2040
Manufacturing of
electric vehicles
TL0 (Baseline) 24,424 52,785 88,590
TL20 47.2% 40.9% 49.6%
TL30c/25v 49.8% 57.4% 53.7%
TL40 93.1% 165.9% 94.2%
Manufacturing of
conventional vehicles
TL0 (Baseline) 845,066 893,707 1,025,884
TL20 -0.8% -1.3% -2.4%
TL30c/25v -0.9% -1.9% -2.4%
TL40 -1.6% -5.6% -4.2%
Electrical equipment
(including batteries)
TL0 (Baseline) 923,368 950,849 1,019,439
TL20 0.3% 0.4% 0.7%
TL30c/25v 0.3% 0.6% 0.7%
TL40 0.6% 1.8% 1.3%
Fossil Fuels
TL0 (Baseline) 589,878 579,307 582,956
TL20 -0.2% -0.4% -0.8%
TL30c/25v -0.2% -0.5% -1.0%
TL40 -0.3% -1.3% -1.9%
Electricity
TL0 (Baseline) 1,054,960 1,134,433 1,287,253
TL20 0.2% 0.4% 1.1%
TL30c/25v 0.2% 0.5% 1.2%
TL40 0.3% 1.2% 2.3%
Other Sectors
TL0 (Baseline) 25,608,768 27,055,166 30,723,227
TL20 0.02% 0.03% 0.00%
TL30c/25v 0.02% 0.04% 0.01%
TL40 0.02% 0.05% 0.02%
6.3.2.2.3.3 Employment
E3ME modelling results on employment
As shown in Table 25, with stricter CO2 target levels resulting in an increase in economic
output, there is also an increase of the number of jobs across the EU-28 compared to the
baseline, be it overall in limited numbers. The number of additional jobs also increases
over time. The main drivers behind the GDP impacts also explain the employment
impacts. The first table shows the results under the assumption that battery cells used in
electric vehicles are imported in the EU from third countries, while for the second table it
is assumed Europe develops its own battery sector. As can be seen, the impacts are more
positive
95
Table 25: Total employment impacts (E3ME) in terms of number of jobs in (000s)
and changes to the baseline (000s jobs)
Battery cells imported from third
countries 2030 2035 2040
Baseline 230,207 225,871 223,148
TL20 20 71 122
TL30c/25v 20 103 149
TL40 86 189 213
Battery cells manufactured in the EU 2030 2035 2040
Baseline 230,233 225,905 223,181
TL20 31 111 122
TL30c/25v 71 133 239
TL40 88 197 334
In the different options assessed, the market uptake of battery and plugin hybrid electric
vehicles increases with respect to the baseline, but the conventional powertrains remains
the large majority of the fleet, as shown in Table 6. While manufacturing battery electric
vehicles has a lower labour intensity than conventional vehicles, the labour intensity of
manufacturing of plug-in hybrid electric vehicles is higher. As a consequence of the
changes in the powertrain shares in the fleet, the impact on employment remains positive.
At sectoral level, similar conclusions as for the impacts on the output can be drawn. The
overall impacts are small. Positive impacts are mainly seen in the sectors supplying to the
automotive sector as well as in the power sector. Other sectors enjoy some positive
second order effects, e.g. as a result of overall increased consumer expenditure. As
shown in Table 26, for these sectors combined, the TL30c/25v scenario results in 22,000
additional jobs in 2030, while 4,000 jobs are lost in the petroleum refining and the
automotive sectors.
Table 26: Employment impacts, broken down by sector - 2030 (E3ME model)
Baseline TL20 TL30c/25v TL40 TL20 TL30c/25v TL40
Number of
jobs (000s)
Number of jobs (000s)
change from baseline
% change from baseline
Petroleum refining 151 0 -1 -1 -0.2% -0.3% -0.5%
Automotive 2,454 0 -3 -12 0.0% -0.1% -0.5%
Rubber and plastics 1,776 5 5 7 0.3% 0.3% 0.4%
Metals 4,288 5 5 5 0.1% 0.1% 0.1%
Electrical
equipment 2,451 5 7 12
0.2% 0.3% 0.5%
Electricity, gas,
water, etc 2,852 2 2 5
0.1% 0.1% 0.2%
Other sectors 200,427 3 3 69 0.0% 0.0% 0.0%
Total 230,209 20 18 86 0.01% 0.01% 0.04%
96
GEM-E3 modelling results on employment
Total employment increases slightly with respect to the baseline in the policy scenarios.
Higher levels of ambition for the CO2 target would lead to a higher increase in the
number of jobs. The table below shows economy-wide results, based on the assumption
that the batteries used in electric vehicles would be manufactured in the EU.
Table 27: Employment impacts under the Baseline (000s jobs) and policy scenarios
(% change from Baseline) under the loan based financing variant – battery cells
manufactured in the EU (GEM-E3)
Scenario 2025 2030 2035 2040
TL0 (Baseline) 218,609 216,367 214,265 212,852
TL20 loan-based 0.01% 0.01% 0.02% 0.01%
TL30c/25v loan-based 0.01% 0.02% 0.02% 0.02%
TL40 loan-based 0.01% 0.04% 0.05% 0.04%
In the case where batteries are manufactured exclusively outside the EU, it was estimated
for the TL30c/25v scenario that the number of jobs would slightly decrease by around
0.016% with respect to the baseline. Even if this scenario remains unlikely, it confirms
the importance of additional measures to ensure battery production within the EU.
The sectoral breakdown of the employment impact, in Table 28, shows that the new jobs
are mainly created in three sectors: advanced vehicles manufacturing, batteries
production, and electrical equipment.
Table 28: Employment impacts, broken down by sector under the Baseline (000s
jobs) and policy scenarios (% change from Baseline) under the loan based financing
variant – battery cells manufactured in the EU (GEM-E3 model)
Sectors Scenario 2025 2030 2040
Manufacturing of electric
vehicles
Baseline 75 147 206
TL20 47.1% 38.3% 48.6%
TL30c/25v 49.8% 55.6% 51.1%
TL40 93.8% 159.8% 85.6%
Manufacturing of
conventional vehicles
Baseline 3,340 3,174 2,998
TL20 -0.9% -1.4% -2.5%
TL30c/25v -0.9% -2.0% -2.5%
TL40 -1.6% -5.8% -4.3%
Electrical equipment goods
(including batteries)
Baseline 4,002 3,740 3,337
TL20 0.3% 0.4% 0.7%
TL30c/25v 0.3% 0.6% 0.7%
TL40 0.5% 1.7% 1.2%
Fossil Fuels Baseline 697 632 519
TL20 -0.1% -0.1% -0.2%
97
TL30c/25v -0.1% -0.2% -0.2%
TL40 -0.1% -0.5% -0.6%
Electricity
Baseline 2,351 2,528 2,660
TL20 0.2% 0.4% 1.1%
TL30c/25v 0.2% 0.5% 1.2%
TL40 0.3% 1.2% 2.3%
Other Sectors
Baseline 208,144 206,146 203,132
TL20 0.00% 0.00% -0.02%
TL30c/25v 0.00% -0.01% -0.02%
TL40 -0.01% -0.03% -0.03%
Other studies
External studies assessing the possible impacts of an accelerated uptake of low- and zero-
emission vehicles conclude that this would lead to an increase in overall employment. A
series of macroeconomic studies – both for the EU-28 as a whole165
and for some
individual Member States166
– show positive impacts on the wider economy, including
growth in GDP and employment.
Positive impacts are also confirmed at the level of car manufacturing even for scenarios
with significantly higher shares of electrified powertrains as high as 100%.
However, the overall employment impacts will be influenced by the actual technology
mix and how other transformative processes such as digitalisation or new business
models, e.g. car sharing, will affect the automotive sector.
A literature review167
of recent studies on employment impacts of a higher share of
electrified powertrains confirms that the majority of studies conclude with positive
impacts on employment. However, the review points out that the positive impacts on
employment rely inter alia on the assumption that the EU would retain its technological
leadership also in the area of electrified powertrains.
A more detailed summary of the external studies on employment and qualifications is
presented in Annex 7.
Broader impacts on employment and qualification of workers
A higher share of electronic components will require different and additional skills
compared to the skills needed for the development, manufacturing and maintaining of
conventional powertrains ('reskilling'). At the components level, the assembly of electric
165 Fuelling Europe’s Future, https://www.camecon.com/how/our-work/fuelling-europes-future/
166 Fuelling France / En route pour un transport durable, 2015, https://www.camecon.com/how/our-
work/en-route-pour-un-transport-durable/; Fuelling Britain's Future (FBF), 2015,
https://www.camecon.com/how/our-work/fuelling-britains-future/; Low Carbon Mobility in Germany:
Challenges and Economic Opportunities, 2017, https://europeanclimate.org/low-carbon-mobility-in-
germany-challenges-and-economic-opportunities./
167 FTI Consulting (2017): The impact of Electrically Chargeable Vehicles on the EU economy, A
literature review and assessment. Study prepared for ACEA:
http://www.fticonsulting.com/~/media/Files/emea--files/insights/reports/impact-electrically-
chargeable-vehicles-eu-economy.pdf
98
engines is technically more complex compared to a conventional engine combined with a
more important role for electronics and digitalisation. This will require better qualified
people ('upskilling'). The consequences for employment and qualification will be
different for each actor in the automotive supply chain. It is expected that some parts of
the value chain will shift from manufacturers to other parts of the supply chain and vice
versa.
A stakeholder meeting organised during the preparation of this impact assessment168
was
dedicated to better understand the potential social impacts of the transition to electrified
powertrains. It brought together key results of recent studies as well as stakeholder views
on how the uptake of low- and zero-emission vehicles may affect employment and skills
(see Annex 2). It showed positive effects on total employment in the automotive sector
and for the economy as a whole by 2030 also when penetration rates as high as 40%
BEV or FCEV and 30% PHEV were assumed.169
However, the magnitude of the impacts
on employment in particular in car manufacturing will depend on the scale and speed of
other on-going transformative processes in the automotive industry, e.g. digitalisation,
new business models such as car sharing will affect the sector.170
The adaptive capacity to cope with these changes varies across the automotive value
chain both for companies and employees. SMEs that are highly specialised in certain
elements of conventional powertrains may need more time to identify and develop new
business opportunities. Unqualified or low qualified workers may have more difficulties
in acquiring the new skills and qualifications needed. Similarly, regions with industry
clusters built around conventional powertrains or with a strong refining industry may be
more negatively affected.
However, the challenges and opportunities in particular for SMEs will be influenced by
the speed of the transition to low- and zero-emission vehicles. While the policy options
considered will require different transition speeds, all of them would only lead to a
gradual transition and not disruptive technological change. In all scenarios by 2030,
conventional powertrains, either as stand-alone or as hybrid technologies, will still be
fitted in the majority of new vehicles and therefore continue to play a key role. This will
provide also highly specialised SMEs and their employees with flexibility to adjust to
new technologies and enter new markets while still benefitting from their strengths in
incumbent technologies.
Independently from the uptake of alternative powertrains, the automotive industry – as
all other sectors – will be faced with fundamental changes in labour markets.
Demographic changes will significantly reduce the labour force potential until 2030 and
168 Stakeholder meeting "Revision of the Regulations on CO2 emissions from light-duty vehicles (post-
2020) – Impact on jobs and skills in the automotive sector", Brussels, 26 June 2017.
169 Fraunhofer IAO (2012): Elektromobilität und Beschäftigung – Wirkungen der Elektrifizierung des
Antriebsstrangs auf Beschäftigung und Standortumgebung (ELAB),
http://www.muse.iao.fraunhofer.de/content/dam/iao/muse/de/documents/AbgeschlosseneProjekte/elab
-abschlussbericht.pdf . The study does not consider how much the workforce is affected along the
value chain, e.g. component suppliers, not does it look at labour structures. These issues are assessed
in a follow-up study "ELAB2". Results were not available yet at the time of writing.
170 Deloitte: The Future of the Automotive Value Chain – 2025 and beyond,
https://www2.deloitte.com/de/de/pages/consumer-industrial-products/articles/automotiv-value-chain-
2025.html
99
beyond. According to the 2015 Ageing Report171
, total labour supply in the EU28 is
projected to almost stabilise between 2013 and 2023, while it is expected to decline by
8.2% between 2023 and 2060, equivalent to roughly 19 million people. As a result, the
automotive sector may be faced with a shortage of qualified employees. Against these
labour market issues in the EU it was suggested that less labour intensive technologies
such as BEVs could indeed improve the EU's competitiveness172
.
A number of measures have been identified on how to allow the workforce to adapt to
the new qualification needs and to make the transition socially fair173
. Possible actions
include industrial collaboration, building new value chains, creating social dialogue,
supporting the employability and retraining of workers / lifelong learning, stimulating
entrepreneurship and creating new job opportunities in the circular economy.
For this reason, as part of the High Level Group for the automotive industry GEAR
2030174
a "Human Capital" Project Team was established to “identify the impact on
employment in the EU, prepare approaches for mitigating possible negative
consequences and develop a strategy for ensuring that the necessary skills will be
available in 2030” for the EU automotive industry. The Project Team assessed the
landscape of existing initiatives across the EU, looked at what trends will impact the
sector up to 2030. Specifically, it investigated the skills and human capital needs and
concluded with specific recommendations on EU and Member State actions on
developing digital skills and supporting (re-)qualification programmes.
In addition, the Commission's Blueprint-initiative175
launched in May 2017 includes the
automotive sector as one of the sectors targeted. It offers the possibility for project
applications to bring together key stakeholders from the social partners to identify
qualification / skills challenges combined with the roll-out of tailored strategies at
national/regional level to address these challenges.
6.3.2.3 Social Impacts
A first element considered as regards social impacts is whether and to what extent the
EU-wide CO2 fleet targets affect different population groups differentiated according to
income groups.
A study176
looking at the dynamics of the used car market and the distribution of costs
and benefits of the EU legislation on CO2 emission standards for LDV confirmed that
used vehicles are far more important for lower income groups and showed that used
vehicles tend to be older among lower income groups.
171 European Commission (2014): The 2015 Ageing Report: Underlying Assumptions and Projection
Methodologies,
http://ec.europa.eu/economy_finance/publications/european_economy/2014/pdf/ee8_en.pdf
172 FTI Consulting (2017): The impact of Electrically Chargeable Vehicles on the EU economy, A
literature review and assessment. Study prepared for ACEA:
http://www.fticonsulting.com/~/media/Files/emea--files/insights/reports/impact-electrically-
chargeable-vehicles-eu-economy.pdf
173 InudstriAll (2017): Structural change in the automotive industry – How to deal with the social
consequences? Presentation by Guido Nelissen, Brussels, 26 June 2017.
174 http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.cfm?item_id=8640
175 http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.cfm?item_id=8848
176 Transport & Mobility Leven (2016) - Data gathering and analysis to improve the understanding of 2nd
hand car and LDV markets and implications for the cost effectiveness and social equity of LDV CO2
regulations (report for the European Commission, DG CLIMA)
100
The study identified a correlation between the fuel efficiency of a vehicle and its
purchase price on the used vehicle market. Reduced CO2 emissions were found to have a
positive effect on the value of a passenger car on the second hand market of around 22
EUR per gram CO2 per km. This means that the lower the CO2 emissions of a used car,
the higher the price an owner can ask for when selling its used car. This price premium is
passed on between subsequent car owners and increases with the sequence of owners.
There is progressive pricing of fuel efficiency with increasing vehicle age.
Due to the socio-economic properties of the used vehicle market, this in turn causes a
redistribution of the benefits of fuel efficiency measures towards the lower income
groups and, consequently, towards regions where a larger share of the population belongs
to those income groups.
In view of this, the quantitative assessment of the options for the fleet-wide CO2 targets
for new vehicles looked also at the total cost of ownership for the second users. This
parameter reflects the difference between a policy scenario and the baseline in the capital
costs, O&M costs and fuel cost savings, during the sixth to tenth year of use of a vehicle
registered in 2025 or 2030.
As for the TCO for the first user (see Section 6.3.2.2.2.3), taxes are included and a
discount rate of 11% for cars or 9.5% for vans is used and the calculation takes account
of the residual value of the vehicle (and the technology added) with depreciation
6.3.2.3.1 TCO for second user - passenger cars (TLC)
The results of the analysis of the TCO for the second user are summarised in Figure 22.
Compared to the first user, the second user will benefit from higher net savings under all
options and in both years. The highest net savings are found under options TLC40 and
TLC_EP40.
Figure 22: TCO-second user (years 6-10) (EUR/car) – 2025 and 2030
The results of the sensitivity regarding the effect of varying cost assumptions are given in
Annex 8.
101
6.3.2.3.2 TCO for second user - vans (TLV)
Figure 23 shows the net savings from a second end-user perspective for an average new
van registered in 2025 and in 2030 under the different options (expressed as the
difference with the baseline).
There are net savings for the second user under all options, and the highest savings are
achieved under option TLV_EP40 in 2025 and under options TLV40 and TVL_EP50 in
2030. However, the second user savings for vans are lower than for the first user (see
Section 6.3.2.2.2).
Figure 23: TCO-second user (years 6-10) (EUR/van) – 2025 and 2030
The results of the sensitivity regarding the effect of varying cost assumptions are given in
Annex 8.
6.3.2.4 Environmental impacts
The main environmental impact of EU-wide CO2 targets for the new LDV fleet concern
the tailpipe CO2 emissions within the sector. The full effect of setting new CO2 targets
for newly registered vehicles in the period 2021-2030 will only be realised over time as a
larger share of the overall vehicle stock becomes subject to the new targets due to fleet
renewal. Therefore, the environmental impacts up to 2040 are shown in this section.
Furthermore, next to 2020, also 2005 is considered as a reference year where this is
relevant to put the emission reductions observed in the sector in a broader policy
perspective177
.
Well-to-wheel CO2 emissions have also been assessed178
. However, due to the
interactions with the EU ETS, care must be taken when interpreting these figures in a
causal fashion. While indicative of a part of upstream emissions as traditionally defined
177 2005 is the reference year for the emission reduction objectives established under the Effort Sharing
Decision and the Commission's 2016 Proposal for an Effort Sharing Regulation
178 In PRIMES-TREMOVE, WTW emissions are defined as upstream emissions, due to fuel and electricity
production, on EU territory only. These emissions change as the vehicle mix changes.
102
in LCAs, they should not be interpreted as the impact on CO2 emissions of the vehicle
standards alone. Furthermore, the assessment looked at possible changes in the
embedded CO2 emissions (related to the manufacturing of the vehicle and its
components) triggered by the targets.
A change in fuel consumption or mix will not only affect greenhouse gas emissions, but
also those of air pollutants (esp. NOx and particulate matter). These co-benefits of the
policy options have also been quantified and assessed.
6.3.2.4.1 Passenger cars (TLC)
CO2 emissions (tailpipe)
Under the baseline (TLC 0), tailpipe CO2 emissions from cars in the EU-28 are reduced
by 26% between 2005 (543 Mt) and 2030 (402 Mt). A stronger reduction is observed
since 2015, when the first CO2 targets for new cars took effect and the reduction is
slowing down after 2030 as no new targets are set beyond 2021.
Figure 24 shows the evolution of the emissions between 2025 and 2040 under the
baseline and the TLC policy options comparing them to the 2005 emissions.
Across the options considered, the additional reductions in 2030 on top of the baseline
range from 4 percentage points (TLC20) to 11.4 percentage points (TLC_EP50). In 2040,
the range is from 19.1 percentage point (TLC20) to 30.3 percentage points (TLC_EP50).
Figure 24: (Tailpipe) CO2 emissions of passenger cars in EU-28 - % reduction
compared to 2005
Figure 25 shows the reduction of the cumulative CO2 emissions over the period 2020-
2040 (compared to the baseline) for the different scenarios. For cars, these emission
reductions range from about 700 Mt (TLC20) up to nearly 1,500 Mt (TLC_EP50).
103
Figure 25: Cumulative (tailpipe) 2020-2040 CO2 emissions of cars for EU-28 –
emission reduction from the baseline (kt)
CO2 emissions (WTW)
When considering the well-to-wheel CO2 emissions, the trends are very similar, with
slightly lower emission reductions. Under the baseline, emissions reduce by 24.8%
between 2005 (658 Mt) and 2030 (495 Mt).
Across the options considered, the additional reductions in 2030 on top of the baseline
range from 3.6 percentage points (TLC20) to 10.2 percentage points (TLC_EP50). In
2040, the range is from 17.8 percentage points (TLC20) to 28.9 percentage points
(TLC_EP50).
Air pollutant emissions
Due to the change in fleet composition under the different policy options concerning the
fleet-wide CO2 target, also the emissions of air pollutants are affected. Under the baseline
and TLC options, compared to 2020, emissions of nitrogen oxides and particulate matter
(PM2.5) from cars are reduced as shown in the tables below.
Table 29: NOx emissions of passenger cars in EU-28 - % reduction compared to
2020
NOx emissions 2025 2030
TLC 0 27% 36%
TLC20 28% 38%
TLC25 28% 39%
TLC30 28% 39%
TLC40 29% 42%
104
TLC_EP40 29% 43%
TLC_EP50 29% 44%
Table 30: PM2.5 emissions of passenger cars in EU-28 - % reduction compared to
2020
PM2.5 emissions 2025 2030
TLC 0 27% 31%
TLC20 22% 33%
TLC25 22% 34%
TLC30 22% 35%
TLC40 22% 42%
TLC_EP40 22% 39%
TLC_EP50 22% 41%
6.3.2.4.2 Vans (TLV)
CO2 emissions (tailpipe)
Under the baseline (TLV 0), tailpipe CO2 emissions from vans in the EU-28 are reduced
by 17.4% between 2005 (113 Mt) and 2030 (94 Mt). The reduction is slowing down after
2030 as no new van targets are set beyond 2020.
Figure 26 shows the evolution of the emissions between 2025 and 2040 under the
baseline and the TLV policy options compared to 2005. Across the options considered,
the additional reductions in 2030 on top of the baseline range from 4.8 percentage points
(TLV20) to 14.1 percentage points (TLV_EP50). In 2040, the range is from 25.6
percentage points (TLV20) to 38.0 percentage points (TLV_EP50).
105
Figure 26: (Tailpipe) CO2 emissions of vans in EU-28 - % reduction compared to
2005
Figure 27 shows the reduction of the cumulative CO2 emissions over the period 2020-
2040 (compared to the baseline) for the different scenarios. For vans, these emission
reductions range from about 200 Mt (TLV20) up to nearly 400 Mt (TLV_EP50).
Figure 27: Cumulative (tailpipe) 2020-2040 CO2 emissions of vans for EU-28 –
emission reduction from the baseline (kt)
106
CO2 emissions (WTW)
When considering the well-to-wheel CO2 emissions, the trends are very similar, with
slightly lower emission reductions. Under the baseline, emissions reduce by 16%
between 2005 (137 Mt) and 2030 (114 Mt).
Across the options considered, the additional reductions in 2030 on top of the baseline
range from 4.4 percentage points (TLV20) to 12.3 percentage points (TLV_EP50). In
2040, the range is from 23.2 percentage points (TLV20) to 33.8 percentage points
(TLV_EP50).
Air pollutant emissions
Due to the change in fleet composition under the different policy options concerning the
fleet-wide CO2 target, also the emissions of air pollutants are affected. Under the baseline
and TLV options, compared to 2020, emissions of nitrogen oxides and particulate matter
(PM2.5) from vans are reduced as shown in the tables below.
Table 31: NOx emissions of vans in EU-28 - % reduction compared to 2020
NOx emissions 2025 2030
TLV 0 22% 31%
TLV20 23% 33%
TLV25 23% 33%
TLV40 24% 36%
TLV_EP40 25% 37%
TLV_EP50 25% 41%
Table 32: PM2.5 emissions of vans in EU-28 - % reduction compared to 2020
PM2.5 emissions 2025 2030
TLV 0 19% 32%
TLV20 20% 33%
TLV25 20% 33%
TLV40 21% 36%
TLV_EP40 22% 38%
TLV_EP50 22% 41%
6.3.2.4.3 Contribution to the ESR targets
As already mentioned in Section 6.1, CO2 emissions from road transport contribute
significantly to the emissions from the sectors not covered under the EU ETS. While the
EU is on track to meet its 2020 target for these sectors (i.e. 10% reduction by 2020 with
respect to 2005) further efforts are necessary to meet the 30% reduction target by 2030.
Maintaining the current CO2 emission standards for cars and vans would not be sufficient
for meeting the EU's 2030 target under the Effort Sharing Regulation, as confirmed by
the EU Reference Scenario 2016179
.
179https://ec.europa.eu/energy/en/data-analysis/energy-modelling
107
The analytical work underpinning the Effort Sharing Regulation and the Energy
Efficiency Directive proposals built on the so-called EUCO30 scenario, under which all
2030 climate and energy targets are met through the implementation of additional
policies to the ones assumed under the EU Reference scenario 2016. For the road
transport sector, these additional policies included more ambitious CO2 emission
standards for new cars and vans.
Under the EUCO30 scenario, emissions from road transport are projected to reduce by
25% in 2030 with respect to 2005. Figure 28 depicts projected GHG emissions in the
road transport sector for the EUCO30 scenario and for several of the options considered
in this Impact Assessment regarding the EU-wide fleet CO2 targets for cars (TLC) and
for vans (TLV).
It shows a significant difference between the emission reduction in road transport in the
EUCO30 scenario and in the baseline used for this Impact assessment. When setting
stricter CO2 targets for new cars and vans for the period after 2020/2021, this difference
gets significantly smaller. However, the options assessed do not close the gap
completely, so that further measures to reduce GHG emissions in the road transport
sector remain relevant, including for example EU policies setting CO2 emissions
performance standards for trucks.
Figure 28: Evolution of GHG emissions between 2005 (100%) and 2030 under the
EUCO30 scenario and under the baseline and different policy options for the CO2
target levels for new cars and vans considered in this impact assessment
An analysis has also been carried out to assess the contribution of the new CO2 standards
for cars and vans to the Member States targets set in the Effort Sharing Regulation
(ESR)180
, which are determined on the basis of the relative GDP per capita.
The analysis is performed by grouping Member States in two groups depending on their
2030 ESR targets. The first group consists of Member States with an ESR reduction
target below 20% and the second group are Member States with a target between -20%
180 COM(2016) 482 final
108
and -40%. For each group, the weighted average181
of the 2030 ESR emissions reduction
targets was calculated for the purpose of this analysis. Table 33 compares these values
with the weighted average182
of the emissions reductions for light-duty vehicles between
2005 and 2030 under two different options for the EU-wide fleet CO2 standards183
.
This shows that the new targets will result in more CO2 emission reductions in Member
States with more ambitious reduction targets under the ESR. This general trend can be
explained by lower income Member States having higher GDP growth and hence faster
transport activity growth. These countries have also a larger second hand market.
Table 33: Comparison of the average of the emission reductions required under the
Effort Sharing Regulation (ESR) and emission reductions for light-duty vehicles
under different policy options
Member State groups
Weighted average of
the ESR emission
reduction targets
CO2 reductions from light-duty vehicles
TLC30 / TLV25 TLC30 / TLV40
ESR target < 20% 9% 9% 10%
ESR target ≥ 20% 35% 33% 34%
An additional comparison was performed with the "EUCO30" scenario to assess whether
the options considered for the automotive sector in this impact assessment are coherent
with the broader 2030 energy and climate policy framework. Table 34 shows the
emissions from the ESR sectors under the EUCO30 scenario and in a scenario
TLC30c/25v+ where the EU-wide fleet CO2 targets for new cars and vans are set as in
options TLC30 and TLV25 (referred to as TL30c/25v), while assuming also other
transport related policies (as in EUCO30)184
.
Table 34: Comparison of CO2 emissions under the EUCO30 scenario and the
TL30c25v+ scenario
2005 2030
EUCO30 TL30c/25v+
ESR emissions [Mt CO2] 2,848 1,985 1,999
% change from 2005 -30.3% -29.8%
In EUCO30, ESR emissions fall by 30.3% in 2030 compared to 2005 levels, which is in
line with the 30% target. In the TL30c/25v+ scenario, the reduction is 29.8%. From this
assessment, it could be concluded that the new policy scenarios and EUCO30 are
consistent in the GHG savings they deliver in the non-ETS sectors. This assessment also
confirms that any remaining gap identified for transport emissions is expected to be
181 Weighted average, according to the 2005 emissions for the non-ETS sectors under the Effort Sharing
Decision
182 Weighted average, according to the 2005 emissions for light-duty vehicles
183 The table illustrates that the results are not significantly impacted by the target levels, so similar
conclusions would apply for other target level combinations.
184 These policies concern eco-driving, Cooperative Intelligent Transport Systems (C-ITS), internalisation
of transport externalities, road infrastructure charges for Heavy Goods Vehicles, and the targets set in
the Commission's 2016 proposal for a revision of the Renewable Energy Directive for the shares of
renewable energy sources used in transport..
109
closed further as additional CO2 reduction policies are being developed in the transport
sector, such as emission standards for heavy-duty vehicles. Additional details on this
analysis are presented in Annex 4.
6.3.3 Timing of the targets (TT)
6.3.3.1 Option TT 1: The new fleet-wide targets start to apply in 2030.
Under this option the new targets start to apply in 2030. Even if the 2030 targets can be
expected to create some anticipation by manufacturers, the absence of more ambitious
CO2 targets prior to 2030 is very likely to cause a number of CO2 reducing technologies
or LEV/ZEV to be introduced only close to the date of application of the new targets, in
particular for those technologies with high manufacturing costs.
Environmental impacts
The expected delayed introduction of fuel-efficient technologies and LEV/ZEV will lead
to higher CO2 and air pollutant emissions in the intermediate period. Furthermore, given
the average lifetime of new vehicles, the vehicle stock in 2030 will continue to have
higher CO2 and air pollutant emissions. As a consequence, in this option, the contribution
of road transport to the 2030 climate and energy targets risks being more limited.
For example, with EU-wide CO2 targets as under options TLC30 and TLV25, in the
worst case whereby no emission reduction happens by 2025 due to the fact that no new
target is set for 2025, the cumulative total CO2 emissions from light duty vehicles in the
period 2020-2030 would be around 81 million tons higher than in a scenario with an
interim target in 2025, stimulating an earlier uptake of more efficient vehicles. This is
equivalent to around 16% of total annual CO2 emissions in 2030 in the baseline. Even if
some reduction efforts were to be anticipated, this indicates that under this option
cumulative CO2 emissions in the period 2020-2030 would be higher.
Economic impacts
As the new targets start to apply only in 2030, there is a limited incentive for
manufacturers to increase and improve their product range of LEV/ZEV at a higher pace
than that needed to meet earlier new targets, as is reflected in the currently low market
share of these vehicles among new registrations.
This option would provide industry with more lead time to invest and develop new
technologies. However, delaying the introduction of more efficient technologies, and
LEV/ZEV in particular, could have a negative impact on the technology cost reduction
through economies of scale.185
At the same time, applying the new target in 2030 only
may provide a weaker signal to potential investors to invest in alternative powertrains
and infrastructure. Given the regulatory developments in other regions in the world,
Europe would risk to lose out as lead market (see section 2.1.3). European manufacturers
185 For instance, based on patent data for combustion engines and alternative technologies for the period
1995-2015, the German automotive industry is among the leading automotive nation in the period
2010-2015. However, this technological potential is not transformed into new products. One reason for
industry to rather wait than investing in further development and marketing of these products are the
higher costs and the expected economies of scale It is therefore necessary to stimulate the market
diffusion of these new technologies. See Falck, O. et al. (2017): "Auswirkungen eines
Zulassungsverbots für Personenkraftwagen und leichte Nutzfahrzeuge mit Verbrennungsmotoren" ifo
Institut, http://www.cesifo-group.de/portal/page/portal/DocBase_Service/studien/Studie-2017-Falck-
etal-Zulassungsverbot-Verbrennungsmotoren.pdf
110
would not benefit from a first mover advantage with negative effects on their
international competitiveness.
Social impacts
Due to the delay in bringing more efficient vehicles on the market, consumers would lose
out on fuel cost savings. Moreover, the delay could provide for more time to prepare for
the new skills required for the production of low- and zero-emission vehicles ('reskilling'
and 'upskilling', see section 6.3.2.2.3.3).
6.3.3.2 Option TT 2: New fleet-wide targets start to apply in 2025, and stricter fleet-
wide targets start to apply in 2030.
Environmental impacts
Since targets are set in 2025 and 2030, this option provides for early action well ahead of
2030. Thus, cumulative emission reductions are expected to be higher. Economic impacts
Setting CO2 targets also in 2025 would provide a clear and early signal for the
automotive sector to increase the market share of LEV/ZEV in the EU from the early
2020s on. At the same time, it would leave sufficient flexibility to manufacturers to phase
in gradually more efficient technologies and hence give sufficient lead time for the
automotive supply chain to adapt through a step by step approach. However, this would
be less the case where a higher average annual reduction of the target level is foreseen in
the earlier period 2021-2025 compared to the later period 2025-2030 such as illustrated
by the EP_40 options.
Social impacts
Consumers would benefit from fuel cost savings from the early 2020s on due to an
earlier introduction of more efficient vehicles (compared to option TT 1). While the
transition to LEV/ZEV would need to commence earlier, there would still be time to
prepare for the new skills requirements.
6.3.3.3 Option TT 3: New fleet-wide targets are defined for each of the years until
2030.
Environmental impacts
This option would ensure CO2 emission reductions follow an annual path, like
installations under the emissions trading system, and therefore would provide greater
certainty for the expected CO2 and air pollutant emission reductions to be effectively
delivered. It would also ensure timely and continuous market uptake of LEVs/ZEVs.
Economic impacts
Annual targets could be perceived as very prescriptive in imposing a rigid annual
emission reduction pathway on manufacturers. Managing year-to-year market
fluctuations, for example, due to changes in customer demand would be almost
impossible without additional flexibility for compliance between years. It would be
challenging for manufacturers to plan the modernisation of models and introduction of
new technologies in their fleet against annual emissions targets. In addition, setting
annual targets in the first years after 2021 may create a risk of limiting lead time for
manufacturers to appropriately plan and implement their strategies for meeting the new
targets. Overall, this could make delivery of the targets rather costly.
Social impacts
Consumers would benefit from fuel cost savings as early as possible.
111
Link with Banking / Borrowing
As explained in section 5.4.4., the timing of the targets affects how banking and
borrowing could be implemented. If no annual targets are set (options TT1 and TT2), a
target trajectory for banking and borrowing would need to be defined. This would avoid
that too many credits are accumulated up to 2025 and/or 2030. There is also the risk that
a manufacturer or pool could significantly exceed the target and hence undermine the
intended CO2 emission reductions for that time period.
6.4 Distribution of effort (DOE)
6.4.1.1 Methodology and introduction
In order to assess the impact of using a utility based or other distribution function for
defining the CO2 target of individual manufacturers, the JRC developed an additional
model (DIONE). For this, a limited number of manufacturer categories were defined
taking into account key common features (see below).
Starting from the segment/powertrain shares resulting from the PRIMES-TREMOVE
model, the impacts per manufacturer category were analysed, taking account of their fleet
characteristics in terms of utility and share of different powertrains and segments.
For a given CO2 target in a given year and applying one of the DOE options, the average
manufacturing cost increase against the baseline per vehicle is calculated for each
manufacturer category.
Manufacturer categorisation
As it is not possible to accurately predict the evolution of the average vehicle mass or
footprint for actual manufacturers over time, the results of this assessment are rather
presented for a limited number of "stylised" manufacturers, each representative of
manufacturers with similar specific characteristics. The criteria used for defining the
manufacturer categories are the fleet composition in terms of market segments for small,
medium, and large cars and the readiness to increase the uptake of low-emission
vehicles. The resulting passenger car and LCV manufacturer categories are presented in
the tables below186
.
186 Small volume manufacturers (with < 10,000 passenger car registrations or <20,000 LCV registrations)
and manufacturers below the de minimis threshold (<1,000 vehicles registered) are not considered in
this quantitative analysis.
112
Table 35: Categories of passenger car manufacturers considered for the assessment
of the DOE options
Category Predominant
segment187
Expected LEV uptake level
188
Manufacturer of smaller cars Small Low
Advanced technology average
car manufacturer Medium Early market leader
Average car manufacturer Medium Average/Low
Advanced technology
manufacturer of larger cars Large Early market leader
Table 36: Categories of LCV manufacturers considered for the assessment of the
DOE options
Category Predominant
segment189
Expected LEV uptake level
Manufacturer of larger LCVs
with EVs Large EV model sales
Manufacturer of larger LCVs Large No EV sales
Manufacturer of smaller LCVs Small Variable
Assessment of the variants to option DOE1 (mass based limit value curve with equal
reduction efforts for all manufacturers)
As regards option DOE 1, the quantitative assessment was only possible for the case
where the utility parameter is 'mass in running order', as no data is yet available on the
WLTP test mass of the different vehicles and manufacturers. Similarly, it was not
possible to quantify the effect of using different slopes for different categories of vans
(i.e. steeper slope for heavier vans).
Overall, the impacts on the results of shifting to WLTP test mass as the utility parameter
can be expected to be limited, as it can be assumed that the average 'mass in running
order' and the average 'WLTP test mass' correlate quite closely, and this correlation
would not differ between different manufacturers or pools. Thus, shifting from 'mass in
running order' to 'WLTP test mass' as the utility parameter would not significantly affect
the relative position of individual manufacturers or pools on the limit value curve.
Possibly, in the case of cars, larger (heavier) vehicles might have relatively more optional
features, which would mean that their ''WLTP test mass' would increase more compared
to smaller (lighter) cars. If so, under an "equal reduction effort" approach, the limit value
curve would tend to become less steep (lower slope), making the targets less strict for
lighter cars, while tightening them for heavier cars.
187 "Small": >75% A/B segment vehicles; "Large": >10% large or >50% upper medium+large vehicles;
"Medium": other.
188 "Early market leader": higher deployment/market share of EVs and/or hybrids; "Low": little/no
deployment of EVs and hybrids. 189 "Small": <50% large LCV or >15% small LCV or car-based sales; "Large" = other
113
As regards the two-slope approach, which was suggested for vans by industry
stakeholders, particular care needs to be taken in designing the limit value curve in such a
way that it ensures that the EU-wide fleet average CO2 target is maintained. While a
linear limit value curve means that the EU-wide fleet average CO2 target corresponds
with the sales-weighted average mass of the fleet, this is no longer the case for a two-
slope approach. Instead, this will require the CO2 target of a vehicle with a mass equal to
the sales-weighted average mass of the fleet to be stricter than the EU-wide fleet CO2
target. In other words, the overall impact of the two-slope approach compared to the
single-slope approach with the same EU-wide fleet target level, would be that the target
is slightly relaxed for both the lightest and the heaviest vehicles, while becoming stricter
for the middle category (i.e. vans with a mass close to the fleet-wide average mass). In
absolute terms, the overall impacts will depend on the target level, but can generally be
expected to be rather limited assuming that the two slopes will not be very different.
6.4.1.1.1 Economic Impacts
6.4.1.1.1.1 Average manufacturing costs
The analysis found that, for a given EU-wide fleet CO2 target, the average manufacturing
costs per vehicle relative to the baseline change only marginally across the different DOE
options considered.
This was expected as the utility function is merely intended to distribute the effort across
the different manufacturers, while not modifying the overall effectiveness and efficiency
of the EU-wide fleet CO2 target level.
For example, when applying the CO2 target for passenger cars of option TLC30 (see
Section 6.3.2), the increase in total manufacturing costs across the options DOE 0 to
DOE 4 ranges from 380 to 399 EUR per vehicle in 2025 and from 1020 to 1051 EUR per
vehicle in 2030.
Similarly, for vans, with the fleet-wide CO2 target of option TLV25, the manufacturing
cost increase across the options DOE 0 to DOE 4 only ranges from 354 to 378 EUR per
vehicle in 2025 and from 619 to 670 EUR per vehicle in 2030.
In view of these limited economic impacts at the EU-wide fleet level, the further
assessment will focus on the impacts on manufacturing costs at manufacturer category
level, which in turn will affect the vehicle pricing and competitive position.
6.4.1.1.1.2 Impacts on competition between manufacturers
This analysis has looked at how manufacturing costs of different types of manufacturers
may change across the DOE options. In addition, since certain vehicle segments (e.g.
smaller budget vehicles) are more price sensitive, and, therefore, the same absolute price
increase could cause more significant impacts for them, the analysis also considered the
cost increase relative to the average price of the vehicles.
Passenger cars
The two figures below show the main results of the analysis for passenger cars in case of
an EU-wide fleet CO2 target in 2025 and 2030 under option TLC30. Figure 29 shows the
cost increase per vehicle (EUR/car), while in Figure 30 these costs are related to the
vehicle price (cost increase in % of car price).
While results are presented here in relation to only one EU-wide fleet target level
options, it should be added that the trends found for other target level options were very
114
similar (the detailed results for TLC25 are shown in Annex 8). The findings mentioned
below can thus be equally applied in relation to all TLC options.
Figure 29: Additional manufacturing costs (EUR/car) for categories of passenger
car manufacturers under different options DOE and with the EU-wide fleet CO2
target levels as in option TLC30
Figure 30: Additional manufacturing costs relative to vehicle price (% of car price)
for categories of passenger car manufacturers under different options DOE and
with the EU-wide fleet CO2 target levels as in option TLC30
Overall, these figures show that for three out of the four categories of car manufacturers
the DOE options do not significantly affect the manufacturing costs (not more than 100
EUR/car in 2025 or 200 EUR/car in 2030).
However, manufacturers of smaller cars face far higher additional manufacturing costs
under options DOE 0, DOE 1 and, most of all, DOE 2 (footprint based limit value curve)
compared to the other options, which are not using a limit value curve. When looking at
the relative cost impacts, this effect is even more visible. The opposite effect is seen for
the "advanced technology manufacturer of large cars", albeit less outspoken.
Amongst the options considered, the most homogeneous distribution of absolute efforts
between manufacturer categories is achieved through a uniform reduction of the target
level (DOE 4). However, both this option and option DOE 3 (uniform target) have the
drawback of being less flexible in accounting for changes in the utility properties of a
manufacturer's fleet as the specific emission targets for individual manufacturers are
fixed and do not vary depending on those properties. Therefore, distributing the efforts
115
without taking into account the utility properties may interfere with a manufacturer's
strategic choices by limiting future segmentation shifts. This would be particularly
challenging for manufacturers producing a less diversified fleet of mainly larger or
mainly smaller vehicle models. Finally, for option DOE 4 it also would need to be
established how to deal with new entrants.
Vans
The two figures below show the main results for vans with EU-wide fleet CO2 targets in
2025 and 2030 as under option TLV40. Figure 31 shows the absolute manufacturing cost
increase (EUR/van), while in Figure 32 these costs are related to the vehicle price (cost
increase in % of van price).
Again, the trends found for other target level options were very similar (the detailed
results for TLV25 are shown in Annex 8). The findings mentioned below can thus be
equally applied in relation to all TLV options.
Figure 31: Additional manufacturing costs (EUR/van) for categories of van
manufacturers under different options DOE and with the EU-wide fleet CO2 target
levels as in option TLV40
Figure 32: Additional manufacturing costs relative to vehicle price (% of van price)
for categories of van manufacturers under different options DOE and with the EU-
wide fleet CO2 target levels as in option TLV40
The figures show that differences in absolute additional manufacturing costs (EUR/van)
among the DOE options considered are rather limited (i.e. not more than 100 EUR/van in
2025 or 200 EUR/van in 2030).
116
The largest distributional impacts are seen for options DOE 2 (footprint) and DOE 3
(uniform target), where costs are significantly lower for manufacturers of smaller vans
compared to the other two categories.
Only very small differences are found between options DOE 0, DOE 1 and DOE 4. In
these cases, the distribution of efforts across manufacturer groups is quite homogeneous,
with slightly higher costs (esp. in relative terms) for manufacturers of smaller vans and
slightly higher ones for "larger LCV with xEV".
As the differences in vehicle price across the manufacturer categories are more limited
than for cars, the effects are very similar when considering the cost increase relative to
those prices.
As regards options DOE 3 and DOE 4, the same considerations regarding the lack of
flexibility for manufacturers as regards future segmentation shifts apply as for cars.
Other considerations (for cars and vans)
From an administrative point of view, maintaining a mass based limit value curve for
distributing the EU-wide fleet target is the simplest option.
As regards the slopes of the limit value curves, maintaining the values currently
established in the Cars and Vans Regulation would be questionable as those slopes were
specifically linked to the targets set for 2020/2021. With the switch to WLTP and the
new targets to be set for post-2020, there seems to be no sound basis for simply
maintaining them.
6.4.1.1.2 Social Impacts
Overall, given the limited impact on the overall costs and on the composition of the fleet,
the different options considered for the distribution of effort are not expected to have
significant social impacts.
There could be impacts in terms of social equity in case the distribution of effort would
lead to a higher (relative) price increase for smaller or medium sized vehicles compared
to premium models. However, there is no evidence available of a direct relationship
between income groups and the size of vehicles purchased.
6.4.1.1.3 Environmental impacts
As the DOE options do not affect the overall CO2 target level, they are not expected to
have an impact on the overall TTW CO2 emissions from cars and vans.
The only conceivable effect would be related to changes in the fleet composition induced
by the DOE mechanism applied. Vehicles with different powertrains may be impacted
differently by these options, e.g. due to differences in utility (mass or footprint), where
such parameter is used for the limit value curve. For example, electric vehicles tend to be
heavier than ICEV, and diesel cars tend to be heavier than petrol cars, and using a mass
based DOE approach would thus tend to favour the market uptake of those types of
vehicles, which in turn may impact the environmental performance of the fleet.
117
6.5 ZEV/ LEV incentives
6.5.1 Introduction and methodological considerations
As a manufacturer's CO2 targets apply for its fleet-wide sales-weighted average
emissions, the share of LEV within the fleet directly affects the emission reductions
needed for the other vehicle types. Therefore, the impacts of the options concerning the
LEV incentives cannot be considered in isolation from those regarding the EU-wide fleet
CO2 target. This is why in this Section the impacts are shown for the different
LEVD/LEVT options in combination with the TLC/TLV options. In order to keep the
number of combinations manageable, only some of the TLC/TLV options were selected,
reflecting a range of fleet-wide CO2 target levels.
It has been assumed that the LEV incentive level set would be met by all
manufacturers190
, both in case of a binding LEV target (option LEVT_MAND) and in
case of a benchmark used in a crediting system (options LEVT_CRED). However, for
option LEVT_CRED, it was also assessed how the impacts would change in case the
LEV benchmark would not be reached or would be overachieved.
As described in Section 5.3.1, targeted LEV incentives would provide a clear pathway
for the automotive sector and public authorities towards the development of an EU
market for these vehicles, thus fostering the required investments in vehicle technology
and refuelling and recharging infrastructure. Starting from a rather low base, the
accelerated uptake of LEV is expected to yield significant economies of scale, hence
bringing down vehicle costs and making LEV more attractive for consumers. Analysts
project that the faster the market grows, the faster costs could come down (see references
in Section 5.3.1).
Therefore, the methodological approach reflects that costs are correlated with
deployment rates, and with additional enabling policies such as the provision of electric
charging infrastructure (reducing range anxiety and enhancing consumer acceptance) and
measures supporting the development of an industrial battery value chain.
These effects have been captured in particular through the assumptions on the evolution
of the battery costs, which are projected to decrease at a faster rate when regulatory LEV
incentives are provided, thanks to the economies of scale and enhanced learning rates.
As a consequence, the following technology cost assumptions were used for the analysis
of the options in this Section (see also Section 6.3.2):
"Medium": Medium costs for all technologies – this was used for option LEV0;
"VLxEV": Very Low costs for EV, i.e. based on battery pack costs of around 100
EUR/kWh in 2025 and 65 EUR/kWh in 2030 and Medium costs for ICEV – this
was used for options LEV%_A, LEV%_B and LEV%_C (see below).
The assessment below does not include the cost of the flanking measures to support the
higher uptake of more efficient vehicles, in particular zero- and low-emission vehicles.
Information on the costs for the alternative fuels infrastructure can be found in the
Communication 'Towards the broadest use of alternative fuels - an Action Plan on
190 As PRIMES-TREMOVE does not model the fleet of individual manufacturers, the situation where the
LEV level is "met by all manufacturers" in the model context means that the share of LEV in the EU-
wide new vehicle fleet equals the LEV target/benchmark.
118
Alternative Fuels Infrastructure'191
. The costs for EU-wide demand side measures (Clean
Vehicles Directive, Eurovignette Directive) can be found in the respective Impact
Assessment reports192
.
6.5.2 Passenger cars: assessment of options with additional incentives for low-
emission vehicles
In order to accelerate the sales of the most advanced low emission vehicles in the EU,
additional incentives can be set. As part of an industrial policy an additional strong
market signal could be sent to consumers and manufacturers. This would increase uptake
and allow industry and consumers to reap economies of scale.
Table 37 shows in the first column (option LEV0) that without an additional market
signal the share of LEV in the new passenger car fleet would only be determined by the
EU-wide CO2 target. For example, in 2025, the ZEV share would range between 5% and
7 % increasing with the CO2 target level as already highlighted in Section 6.3.2.
It should be noted that a low emission vehicle is defined differently across the three
options LEVD_ZEV, LEVD_25 and LEVD_50, i.e. the LEV shares cannot be directly
compared between those three options because of the different coverage of vehicle
types193
.
Table 37 also shows the different LEV mandate or benchmark levels for the years 2025
and 2030. For example, for zero emission vehicles (ZEV) sales would be raised to 10%,
15% or 20% in 2025, and to 15%, 20% or 25% in 2030.
It can be seen that LEV mandate or benchmark levels were selected as an incremental
increase in the order of around 5% from the LEV0 fleet shares, which broadly mirrors the
recent announcements by many EU manufacturers as regards their expected LEV uptake
for the coming decade (see Table 4 in Section 5.3.1).
Table 37: Overview of the share (%) of LEV in the new car fleet in 2025 and 2030
when no LEV incentive is applied (LEV0) and with three different LEV
mandates/benchmarks in 2025 and 2030 for different combinations of LEV
definitions (LEVD) and CO2 target levels (TLC)
LEVD_ZEV 2025 2030
LEV0 LEV%_A LEV%_B LEV%_C LEV0 LEV%_A LEV%_B LEV%_C
TLC20 5%
10% 15% 20%
8%
15% 20% 25% TLC25 5% 8.5%
TLC30 5.5% 9%
TLC40 7% 12%
LEVD_25 2025 2030
191 Communication from the Commission to the European Parliament, the Council, the European Economic
and Social Committee and the Committee of the Regions. Towards the broadest use of alternative fuels
– an Action Plan on Alternative Fuels Infrastructure under Article 10(6) of Directive 2014/94/EU,
including the assessment of national policy frameworks unde rARticle 10(2) of Directive 2014/94/EU.
192 http://ec.europa.eu/transparency/regdoc/?fuseaction=ia
193 For option LEVD_50, the shares shown in Table 37 do not represent the actual market share of LEV
because of the counting of LEV on the basis of their CO2 emissions, as explained in Section 5.3.2.1
(Table 5)
119
LEV0 LEV%_A LEV%_B LEV%_C LEV0 LEV%_A LEV%_B LEV%_C
TLC20 8%
15% 20% 25%
12%
25% 30% 35% TLC25 8% 12.5%
TLC30 8.5% 13%
TLC40 12% 20.5%
LEVD_50 2025 2030
LEV0 LEV%_A LEV%_B LEV%_C LEV0 LEV%_A LEV%_B LEV%_C
TLC20 7%
15% 20% 25%
10.5%
25% 30% 35% TLC25 7% 11%
TLC30 7% 12%
TLC40 10% 17.5%
Furthermore, in order to reach these higher sales levels, as explained in Section 5.3.2.2,
three different LEV incentive policy instruments are being considered:
(i) binding mandate (LEVT_MAND);
(ii) crediting system with a one-way CO2 target adjustment (LEVT_CRED1);
(iii) crediting system with a two-way adjustment (LEVT_CRED2).
6.5.2.1 Economic impacts
For the assessment of the economic impacts of the LEV incentives options, the same
indicators are used as for assessing the options regarding the EU-wide CO2 target levels
(TLC) (see Section 6.3.2.2).
Below, the net savings achieved under the different LEV incentives options are
summarised for the indicator "TCO-15 years". The results for the other indicators
regarding net economic savings from a societal perspective and net economic savings
over the first five years were very similar.
The detailed results for all options and indicators as well as the results of a sensitivity
analysis varying the cost assumptions for the battery are provided in Annex 8.
TCO-15 years (vehicle lifetime)
Figure 33 shows the net economic savings, taking into account capital costs, O&M costs
and fuel costs, over the lifetime of an "average" passenger car registered in 2025 or in
2030 for the different LEV incentive options as regards the definition (LEVD) and
target/benchmark level (LEV%), in combination with four different options for the EU-
wide CO2 target level (TLC20, TLC25, TLC30 and TLC40). The net savings are
calculated as the difference with the baseline.
The key general trends observed can be summarised as follows.
Firstly, all options considered bring net economic savings over the vehicle lifetime.
Depending on the option, net savings per car are up to about 1,000 EUR in 2025 and up
to about 2,400 EUR in 2030, and they increase with increasingly strong CO2 target
levels.
Both the fuel savings and the capital costs are key factors as regards the net savings
achieved. The capital costs of LEV, and in particular of ZEV, are mainly determined by
120
the cost of batteries and, as explained above, these are set to decrease with the
introduction of additional LEV incentives creating economies of scale.
Secondly, in 2030 net economic savings are highest for the options with the lower LEV
incentive compared to the other options, i.e. higher LEV incentives and LEV0.
In some cases, the higher LEV incentives have lower net economic savings than the
option LEV0 without an additional incentive, e.g. in 2030 for TLC20 combined with
LEVD_25 or LEVD_50 and for TLC25 combined with LEVD_50.
More generally, for TLC20 the potential net savings in case of a LEV mandate or
crediting system are much lower, or slightly negative. This is not surprising: in order to
reach the lowest CO2 target combined with a LEV mandate or crediting system, higher
PHEV and BEV uptake would substitute for the wide deployment of the least costly less
advanced ICEV technologies.
The results for 2025 are largely similar as for 2030.
121
Figure 33: TCO-15 years (vehicle lifetime) (net savings in EUR/car for 2025 and
2030) for different LEV incentive options
In terms of the policy instrument chosen to reach the higher sales levels, the first option,
i.e. the binding mandate, will deliver if combined with a strong enough compliance
system. However, this situation could be different in the case of the crediting system
which, in principle, leaves more flexibility to car manufacturers tailored to their own
sales and innovation strategy.
Compared to a crediting system, a binding mandate reduces the flexibility for
manufacturers to react to changes in relative costs between LEV/ZEV and conventional
technologies. If e.g. battery costs decrease faster than expected, a crediting system offers
stronger incentives to invest further in LEV/ZEVs and increase further the
competitiveness of the European automotive industry in this technology. A pure binding
mandate does not offer these flexibilities and scores therefore lower in terms of
efficiency and proportionality.
0
500
1000
1500
2000
2500
3000
TLC20 TLC25 TLC30 TLC40
€/c
ar (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_ZEV
LEV%_15 LEV%_20 LEV%_25 LEV0
203020302030
0
500
1000
1500
2000
2500
3000
TLC20 TLC25 TLC30 TLC40
€/c
ar (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_25
LEV%_25 LEV%_30 LEV%_35 LEV0
203020302030
0
500
1000
1500
2000
2500
TLC20 TLC25 TLC30 TLC40
€/c
ar (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_50
LEV%_25 LEV%_30 LEV%_35 LEV0
203020302030
0
200
400
600
800
1000
1200
TLC20 TLC25 TLC30 TLC40
€/c
ar (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_ZEV
LEV%_10 LEV%_15 LEV%_20 LEV0
-200
0
200
400
600
800
1000
1200
TLC20 TLC25 TLC30 TLC40
€/c
ar (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_25
LEV%_15 LEV%_20 LEV%_25 LEV0
2025
-400
-200
0
200
400
600
800
1000
1200
TLC20 TLC25 TLC30 TLC40
€/c
ar (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_50
LEV%_15 LEV%_20 LEV%_25 LEV0
2025
2025
122
Under the two crediting options, LEVT_CRED1 and LEVT_CRED2, the LEV
benchmark would be non-binding, which means that it may be over- or underachieved by
individual manufacturers or pools, and this will affect their fleet-wide CO2 target as
explained in Section 5.3.2.2.
The economic impacts of these options will depend on the extent to which the LEV share
of different manufacturers will be above or below the LEV benchmark in 2025 and 2030.
As the strategic choices that will be made by individual manufacturers are not known in
advance, numerous variants could be designed in terms of LEV share and, consequently,
the corresponding CO2 target.
In order to understand the overall bandwidth and the potential trade-offs, a "low LEV"
case, where the average LEV fleet share is below the LEV benchmark, and a "high LEV"
case, where the average LEV fleet share is above the LEV benchmark, will be further
analysed.
The figures below are examples with the aim of illustrating how the economic impacts of
options LEVT_CRED1 and LEVT_CRED2 could evolve in case the LEV benchmark set
is not met at the level of the EU-wide fleet.
Figure 34 illustrates the effects on net savings for TCO-15 years which could be expected
in case of a two-way adjustment of the CO2 target level (option LEVT_CRED2). It
shows the situation for 2030 with a CO2 target as under option TLC30 and the lower
benchmark of option LEV%_A194
.
Under this option, net savings will tend to evolve between the situation where the LEV
benchmark is exactly met (point A) and the "end points" for the "low LEV" case (point
B) or "high LEV" case (point C). In this case, the tightening or relaxation of the CO2
target will be limited to a maximum of 5%, which determines the two end points of the
possible range.
In case the overall LEV fleet share is below the LEV benchmark, net savings will evolve
towards point B as the EU-wide fleet CO2 target becomes up to 5% stricter, while the
market penetration of LEV decreases and would become too low to create economies of
scale. As a result of this, battery costs would be higher than in case the LEV benchmark
is met.
In case the manufacturer reaches an overall LEV share in the fleet that is higher than the
LEV benchmark, the net savings will evolve towards point C with increasing LEV fleet
shares as the EU-wide fleet CO2 target becomes up to 5% less strict, but the market
uptake of LEV increases.
Figure 35 illustrates the expected impacts on net savings (TCO-15 years) in case of
option LEVT_CRED1 (one-way adjustment of the CO2 target level).
Under this option, the situation is the same as for LEVT_CRED2 in case the overall LEV
share in the fleet is higher than the LEV benchmark (point C).
However, in case the overall LEV fleet share is below the LEV benchmark, net savings
will evolve towards point B, as the initial CO2 target level is not tightened. As for
LEVT_CRED2, battery costs would be higher than in case the LEV benchmark is met.
194 This means a LEV benchmark of 15% in case of LEVD_ZEV and 25% in case of LEVD_25 and
LEVD_50 (green lines in the figures)
123
As can be seen, for the situation shown, the net savings would always tend to decrease in
case the LEV benchmark is not met.
Furthermore, under option LEVT_CRED1, the one-way adjustment mechanism weakens
the signal provided to the market as regards the uptake of LEV. Indeed, as there would be
no consequences for manufacturers in not achieving the LEV benchmark, the LEV
benchmark would become fully voluntary.
124
Figure 34: Illustration of the impacts of option LEVT_CRED2 (net savings, TCO-
15 years) in case the LEV benchmark is not exactly met (with the CO2 target of
option TLC30 and the benchmark of option LEV%_A)
125
Figure 35: Illustration of the impacts of option LEVT_CRED1 (net savings, TCO-
15 years) in case the LEV benchmark is not exactly met (with the CO2 target of
option TLC30 and the benchmark of option LEV%_A)
126
Interaction between the LEV/ZEV crediting system and the CO2 fleet-wide reduction
level
The CO2 fleet-wide reduction level and the level of the ZEV/LEV benchmark in the case
of the crediting system will also have an impact on the efficiency of the conventional
vehicles. Setting a LEV incentive increases the market uptake of LEV. As a
consequence, in order to comply with the CO2 fleet-wide target, lower efforts are
required to improve the efficiency of the conventional vehicles.
Table 38 shows the changes in percentages of the emissions of an average conventional
car in 2030 compared with the average baseline conventional vehicle in 2020/2021 when
combining the CO2 fleet target of 25% or 30% reduction with a LEV mandate or with a
LEV crediting system.
It shows that the efforts required for conventional vehicles would be significantly lower
in case of a crediting system with a 5% overachievement of the LEV benchmark. As a
matter of fact, CO2 emissions of the average conventional vehicle could be relaxed and
become 2 to 12% higher in case of a 25% reduction target. For a 30% reduction target,
the range of changes in emissions would be from -5 to +5%.
In the other case of 5% underachievement of the LEV benchmark, manufacturers would
have to significantly reduce CO2 emissions from their conventional vehicles as indicated
in Table 38: average emissions would be 12% or 18 % lower than for the baseline
vehicle, in case of a 25% and a 30% reduction target, respectively. This would give quite
a strong signal to manufacturers to reach the LEV benchmark and would have to be
considered when designing the trade-off between the level of underachievement and the
corresponding adjustment of the CO2 target.
In a situation with a LEV mandate, CO2 emissions of the average conventional vehicle
are between 3 and 7% and between 8 and 13% lower than for the baseline vehicle, in
case of a 25% and a 30% reduction target, respectively.
So, in a number of the options below there would be no incentive left for the
technological advancement of internal combustion engines after 2020/21. This will have
to be taken into consideration as part of the wider industrial policy when designing the
trade-off between the percentage of over achievement and the credit in terms of lowering
the CO2 target.
Table 38: Emissions of an average conventional car in 2030 - expressed as %
difference compared with a baseline conventional car in 2020/2021 - under options
TLC25 and TLC30 in case of a LEV mandate (LEV%_A) and in case of a crediting
system, with 5% overachievement of the LEV benchmark
LEVD_ZEV TLC25 TLC30
LEVT_MAND -7% -13%
LEVT_CRED with 5%
overachievement of the benchmark +2% -5%
LEVT_CRED with 5%
underachievement of the benchmark -12% -18%
127
LEVD_25 TLC25 TLC30
LEVT_MAND -4% -10%
LEVT_CRED with 5%
overachievement of the benchmark +9% +2%
LEVT_CRED with 5%
underachievement of the benchmark -12% -18%
LEVD_50 TLC25 TLC30
LEVT_MAND -3% -8%
LEVT_CRED with 5%
overachievement of the benchmark +12% +5%
LEVT_CRED with 5%
underachievement of the benchmark -12% -18%
Macroeconomic assessment, including employment
The assessment of the macro-economic impacts of the options regarding LEV/ZEV
incentives is done at the level of the light-duty vehicles as a whole and this is presented
in Section 6.5.4.
Energy system impacts
The final energy demand from passenger cars in 2030 shows limited variation amongst
the different options considered for the LEV incentives (including LEV0).
The increased market penetration of electrically chargeable vehicles (BEV, PHEV) leads
to higher shares of electricity in the final energy demand for transport. Nevertheless, as
illustrated in Table 39, these effects remain rather limited across the range of options
considered.
Table 39: Electricity share in the final energy demand for passenger cars
Option for EU-
wide fleet CO2
target level
LEV0 Other LEV options
(various LEVT, LEVD, LEV%)
2025 2030 2025 2030
TLC20 0.7% 1.8% Up to 1.6% Up to 4%
TLC25 0.7% 1.9% Up to 1.6% Up to 4%
TLC30 0.7% 2.0% Up to 1.6% Up to 4%
TLC40 0.7% 2.6% Up to 1.8% Up to 4.5%
The share of cars and vans in the total EU-28 electricity consumption is shown in Table 9
(Section 6.3.2.2.1.4).
Administrative burden
The different options considered as regards the ZEV/LEV incentives would not create
significant additional administrative costs.
128
In case of a binding mandate (LEVT_MAND), an additional dedicated regime would
need to be established to allow verifying whether individual manufacturers comply with
the mandatory LEV share.
In contrast, under a crediting system (LEVT_CRED), compliance checking would only
be against the CO2 target.
6.5.2.2 Social Impacts
As for the assessment of the options regarding the EU-wide CO2 targets (TLC), the TCO
(net savings) for the second user was used as an indicator for quantifying the social
impacts of the LEV incentives options.
The figures below show the results for an "average" passenger car newly registered in
2025 or 2030.
The general findings are similar to those discussed in relation to the economic impacts
(see Section 6.5.2.1). However, the differences between the various scenarios in the
absolute net savings per car tend to be lower when looking at the TCO for the second
user compared to the vehicle lifetime (TCO-15 years).
129
Figure 36: TCO-second user (years 6-10) (EUR/car) in 2025 and 2030 for different
LEVD/LEVT options
6.5.2.3 Environmental impacts
CO2 emissions (tailpipe)
The different options for the LEV incentives show variations in the tailpipe CO2
emission levels as shown in the table below. The emissions are mainly determined by the
EU-wide fleet CO2 target, but also the fleet composition has an effect due to the
differences in the gap between test and real word emissions.
-200
-100
0
100
200
300
400
500
600
TLC20 TLC25 TLC30 TLC40
€/c
ar (
ne
t sa
vin
gs T
CO
-ye
ars
6-1
0 (s
eco
nd
use
r))
LEVD_ZEV
LEV0 LEV%_10 LEV%_15
-200
-100
0
100
200
300
400
500
600
TLC20 TLC25 TLC30 TLC40
€/c
ar (
ne
t sa
vin
gs T
CO
-ye
ars
6-1
0 (s
eco
nd
use
r))
LEVD_25
LEV0 LEV%_15 LEV%_20
2025
-200
-100
0
100
200
300
400
500
600
TLC20 TLC25 TLC30 TLC40
€/c
ar (
ne
t sa
vin
gs T
CO
-ye
ars
6-1
0 (s
eco
nd
use
r))
LEVD_50
LEV0 LEV%_15 LEV%_20
2025
2025
0
200
400
600
800
1000
1200
1400
1600
TLC20 TLC25 TLC30 TLC40
€/c
ar (
ne
t sa
vin
gs T
CO
-ye
ars
6-1
0 (s
eco
nd
use
r)
LEVD_ZEV
LEV0 LEV%_15 LEV%_20
203020302030
0
200
400
600
800
1000
1200
1400
TLC20 TLC25 TLC30 TLC40
€/c
ar (
ne
t sa
vin
gs T
CO
-ye
ars
6-1
0 (s
eco
nd
use
r))
LEVD_25
LEV0 LEV%_25 LEV%_30
203020302030
0
200
400
600
800
1000
1200
1400
TLC20 TLC25 TLC30 TLC40
€/c
ar (
ne
t sa
vin
gs T
CO
-ye
ars
6-1
0 (s
eco
nd
use
r))
LEVD_50
LEV0 LEV%_25 LEV%_30
203020302030
130
Table 40: CO2 emission reductions (%) between 2005 and 2030 (passenger cars)
Option for EU-wide fleet
CO2 target level
LEV0 Other LEV options
(various LEVT, LEVD, LEV%)
TLC20 30% 32.2% - 32.4%
TLC25 30.5% 32.2% - 32.4%
TLC30 31% 32.2% - 32.4%
TLC40 33.6% 34.4% - 34.6%
Impacts of options LEVT_CRED in case the LEV benchmark is not met or overachieved
As explained in Section 5.3.2.2, in case of a LEV crediting system, the EU-wide fleet
CO2 target may vary depending on whether the LEV benchmark is under- or
overachieved. The adjustment of the CO2 target is however limited to a maximum of 5%.
Therefore, the "end points" for the LEVT_CRED options as regards the environmental
impact in terms of CO2 tailpipe emissions would be similar as for the TLC options with a
CO2 target that is 5% higher, respectively 5% lower (only in case of LEVT_CRED2)
than in the corresponding LEVT_MAND option195
. These impacts can be derived from
the results shown in Section 6.3.2.4.1.
Air pollutant emissions
The LEV incentives options lead to somewhat lower air pollutant emissions, in particular
due to the higher market shares of ZEV. As shown in Table 41 and Table 42, emission
reductions of NOx and PM2.5 over the period 2020-2030 show rather limited variation
among the different LEV incentive options considered.
Table 41: NOx emission reductions (%) between 2020 and 2030 (passenger cars)
Option for EU-wide fleet
CO2 target level
LEV0 Other LEV options
(various LEVT, LEVD, LEV%)
TLC20 38% 42% - 46%
TLC25 38.5% 42% – 46%
TLC30 39% 42% – 46%
TLC40 42% 44% - 46%
Table 42: PM2.5 emission reductions (%) between 2020 and 2030 (passenger cars)
Option for EU-wide fleet
CO2 target level
LEV0 Other LEV options
(various LEVT, LEVD, LEV%)
TLC20 34% 38% - 42%
TLC25 34.5% 38% - 43%
TLC30 35% 38% - 43%
TLC40 38% 40% - 43%
195 "corresponding" in the sense that the CO2 target would be the same in case the LEV benchmark is
exactly met
131
6.5.3 Vans: assessment of options with additional incentives for low-emission
vehicles
Similarly to passenger cars (Section 6.5.2), additional incentives were considered in
order to accelerate the sales of low emission vans.
Table 43 shows in the first column (option LEV0) the share of LEV in the new van fleet,
which without an additional market signal would only be determined by the EU-wide
CO2 target. For example, in 2025, the ZEV share would range between 2.5% and 3.5 %
increasing with the CO2 target level as already highlighted in Section 6.3.2.
It should be noted that a low emission van is defined differently across the three options
LEVD_ZEV, LEVD_40 and LEVD_50, so the LEV shares cannot be directly compared
between those three options because of the different coverage of vehicle types.
Table 43 also shows two different LEV mandate or benchmark levels, (options LEV%_A
and LEV%_B) for the years 2025 and 2030. For example, for zero emission vehicles
(ZEV) sales would be raised to 10% or 15% in 2025, and to 15% or 20% in 2030.
Table 43: Overview of the share (%) of LEV in the new van fleet in 2025 and 2030
when no LEV incentive is applied (LEV0) and of two LEV mandates/benchmarks in
2025 and 2030 for different combinations of LEV definitions (LEVD) and CO2
target levels (TLV)
LEVD_ZEV 2025 2030
LEV0 LEV%_A LEV%_B LEV0 LEV%_A LEV%_B
TLV20 2.5%
10% 15%
3.5%
15% 20% TLV25 2.7% 3.7%
TLV40 3.5% 5.5%
LEVD_40 2025 2030
LEV0 LEV%_A LEV%_B LEV0 LEV%_A LEV%_B
TLV20 10.5% 15% 20%
17.5% 25% 30%
TLV25 11.5% 18.5%
TLV40 16.5% 20% 25% 30% 35% 40%
LEVD_50 2025 2030
LEV0 LEV%_A LEV%_B LEV0 LEV%_A LEV%_B
TLV20 4.5%
15% 20%
7.5%
25% 30% TLV25 5% 8%
TLV40 7.5% 12.5%
In order to reach these higher sales levels, as explained in Section 5.3.2.2, three different
LEV incentive policy instruments are being considered:
(i) binding mandate (LEVT_MAND);
(ii) crediting system with a one-way CO2 target adjustment (LEVT_CRED1);
(iii) crediting system with a two-way adjustment (LEVT_CRED2).
132
6.5.3.1 Economic impacts
For the assessment of the economic impacts of the LEV incentives options, the same
indicators are used as for the assessing the options regarding the EU-wide CO2 target
levels (TLV) (see Section 6.3.2.2.2).
Below, the net savings achieved under the different LEV incentives options are
summarised for the indicator TCO-15 years. The results for the other indicators (net
economic savings from a societal perspective and net economic savings over the first five
years) were very similar.
The detailed results for all options and indicators are provided in Annex 8.
TCO-15 years (vehicle lifetime)
Figure 37 shows the net economic savings taking into account capital costs, O&M costs
and fuel costs over the lifetime of an "average" van in 2025 and 2030 for the different
LEV incentive options as regards the definition (LEVD) and target/benchmark level
(LEV%), in combination with three different options for the EU-wide CO2 target level
(TLV20, TLV25 and TLV40). The net savings are calculated as the difference with the
baseline.
The key general trends observed can be summarised as follows.
Firstly, and very different from the results for passenger cars, both for 2025 and for 2030
in all cases with one exception the option where no incentives are set (LEV0) shows the
highest net economic savings compared to the options with additional incentives for
ZEV/LEV. Furthermore, the net savings are higher for the lower levels of the LEV
mandate/benchmark (option LEV%_A).
Still, all options considered with only one exception bring net economic savings over the
vehicle lifetime. Depending on the option, net savings are up to about 2,500 EUR for a
2025 new van and up to about 4,500 EUR for a 2030 new van.
Both fuel savings and capital costs are key factors as regards the net savings achieved.
The capital costs of LEV, and in particular of ZEV, are mainly determined by the cost of
batteries and, as explained above, these are set to decrease with the introduction of LEV
incentives creating economies of scale.
Secondly, with rising CO2 fleet-wide targets from TLV20, TLV25 to TLV40 also the net
economic savings increase.
133
Figure 37: TCO- 15 years (EUR/van) in 2025 and 2030 for different LEVD/LEVT
options
Impacts of options LEVT_CRED (1 and 2) in case the LEV benchmark is not exactly met
Under the two crediting system options LEVT_CRED1 and LEV_CRED2, the LEV
benchmark would be non-binding, which means that it may be over- or underachieved by
individual manufacturers (or pools), which would affect the fleet-wide CO2 target as
explained in Section 5.3.2.2. Thus, the economic impacts of this option will depend on
the extent to which the LEV share of different manufacturers is higher or lower than the
LEV benchmark in 2025 or 2030.
As the strategic choices that would be made by individual van manufacturers in this
respect are not known, for the purpose of the analysis numerous variants could be
designed in terms of LEV share and, consequently, CO2 target.
However, since the economic analysis above showed that the option without an
additional LEV incentive is economically superior compared to the ones with a crediting
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_ZEV
LEV0 LEV%_A LEV%_B
203020302030
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_40
LEV0 LEV%_A LEV%_B
203020302030
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_50
LEV0 LEV%_A LEV%_B
203020302030
0
500
1000
1500
2000
2500
3000
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_ZEV
LEV0 LEV%_A LEV%_B
0
500
1000
1500
2000
2500
3000
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_40
LEV0 LEV%_A LEV%_B
2025
-500
0
500
1000
1500
2000
2500
3000
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-1
5 y
ear
s)
LEVD_50
LEV0 LEV%_A LEV%_B
2025
2025
134
system, van manufacturers would most likely not voluntarily increase sales of low
emission vans to reach or even overachieve the benchmark. This means that given the
underlying economics setting a voluntary LEV benchmark would most likely not create
the necessary incentivising effect.
Energy system impacts
The final energy demand from vans in 2030 shows limited variation amongst the
different options considered for the LEV incentives (including LEV0).
The increased market penetration of electrically chargeable vehicles (BEV, PHEV) leads
to higher shares of electricity in the final energy demand for transport. Nevertheless, as
illustrated in the table below, these effects remain rather limited with respect to the total
energy demand of vans across the range of options considered.
Table 44: Electricity share in the final energy demand of vans
Option for CO2
target level
LEV0 Other LEV options (various
LEVT, LEVD, LEV%)
2025 2030 2025 2030
TLV20 0.4% 1.5% 1% - 1.4% 2.5% - 4.7%
TLV25 0.5% 1.6% 0.9% -1.8% 2.5% - 4.7%
TLV40 0.7% 2.3% 1.1% -2.3% 2.9% - 6.1%
Light Duty Vehicle Electricity consumption
Table 45 shows the share of the total EU-28 electricity consumption used by cars and
vans in 2025 and 2030 for selected policy options. It illustrates that, even with the
highest LEV mandates/benchmarks considered, the share of electricity used by LDV up
to 2030 is not more than a few percent of total electricity consumption.
Table 45: Electricity consumption by cars and vans with respect to total electricity
consumption (EU-28) under different options for the EU-wide CO2 target and LEV
incentives
Options
Share of cars and vans in total
electricity consumption
cars vans 2025 2030
TLC30, LEV%_B TLV25, LEV%_B 1.0% 2.5%
TLC40, LEV%_B TLV40, LEV%_B 1.4% 3.0%
6.5.3.2 Social Impacts
As for the assessment of the options regarding the EU-wide CO2 targets (TLV, see
Section 0) the TCO (net savings) for the second user of vans will be used as an indicator
for quantifying the social impacts of the LEV incentives options.
The figure below shows the results for an "average" van newly registered in 2025 or
2030.
The general findings are similar to those discussed in relation to the economic impacts
(see Section 6.5.3.1). However, the differences between the various scenarios in the
135
absolute net savings per car tend to be smaller when looking at the TCO for the second
user compared to the vehicle lifetime (TCO-15 years).
Figure 38: TCO-second user (years 6-10) (EUR/van) in 2025 and 2030 for different
LEVD/LEVT options
6.5.3.3 Environmental impacts
CO2 emissions (tailpipe) of vans
The different options for the LEV incentives show variations in the tailpipe CO2
emission levels as shown in the table below. The emissions are mainly determined by the
EU-wide fleet CO2 target, but also the fleet composition has an effect due to the
differences in the gap between test and real word emissions.
0
200
400
600
800
1000
1200
1400
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-y
ear
s 6
-10
(se
con
d u
ser)
)
LEVD_ZEV
LEV0 LEV%_A LEV%_B
0
500
1000
1500
2000
2500
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-y
ear
s 6
-10
(se
con
d u
ser)
)
LEVD_ZEV
LEV0 LEV%_A LEV%_B
203020302030
0
200
400
600
800
1000
1200
1400
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-y
ear
s 6
-10
(se
con
d u
ser)
)
LEVD_40
LEV0 LEV%_A LEV%_B
2025
0
500
1000
1500
2000
2500
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-y
ear
s 6
-10
(se
con
d u
ser)
)
LEVD_40
LEV0 LEV%_A LEV%_B
203020302030
0
200
400
600
800
1000
1200
1400
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-y
ear
s 6
-10
(se
con
d u
ser)
)
LEVD_50
LEV0 LEV%_A LEV%_B
2025
0
500
1000
1500
2000
2500
TLV20 TLV25 TLV40
€/v
an (n
et
savi
ngs
TC
O-y
ear
s 6
-10
(se
con
d u
ser)
)
LEVD_50
LEV0 LEV%_A LEV%_B
203020302030
136
Table 46: CO2 emission reduction (%) between 2005 and 2030 (vans)
Option for EU-wide fleet
CO2 target level
LEV0 Other LEV options
(various LEVT, LEVD, LEV%)
TLV20 22.2% 26.1%-26.7%
TLV25 22.6% 26.3% -26.7 %
TLV40 26.4% 27.4% - 31.3%
Impacts of options LEVT_CRED in case the LEV benchmark is not exactly met
As explained in Section 5.3.2.2, for options LEVT_CRED1 and LEV_CRED2, the EU-
wide fleet CO2 target may vary depending on whether the LEV benchmark is under- or
overachieved.
The adjustment of the CO2 target is however always limited to a maximum of 5%.
Therefore, the "end points" for the LEVT_CRED options in terms of CO2 tailpipe
emissions would be similar as for the TLV options with a CO2 target that is 5% higher
(for LEVT_CRED2 only), respectively 5% lower than in the corresponding
LEVT_MAND option196
. These impacts can be derived from the results shown in
Section 6.3.2.4.1.
Air pollutant emissions
The LEV incentives options lead to somewhat lower air pollutant emissions, in particular
due to the higher market shares of ZEV. As shown in the tables below, emission
reductions of NOx and PM2.5 over the period 2020-2030 show limited variation among
the different LEV incentive options considered.
Table 47: NOx emission reduction (%) between 2020 and 2030 (vans)
Option for EU-wide fleet
CO2 target level
LEV0 Other LEV options (various
LEVT, LEVD, LEV%)
TLV20 33% 37% - 43%
TLV25 33% 36% – 43%
TLV40 36% 38% - 45%
Table 48: PM2.5 emission reduction (%) between 2020 and 2030 (vans)
Option for EU-wide fleet
CO2 target level
LEV0 Other LEV options (various
LEVT, LEVD, LEV%)
TLV20 33% 36%-42%
TLV25 33% 36% - 42%
TLV40 36% 38% - 45%
196 "corresponding" in the sense that the CO2 target would be the same in case the LEV benchmark is
exactly met
137
6.5.4 Macroeconomic impacts, including employment, of setting LEV incentives for
cars and vans
6.5.4.1 Introduction and methodological considerations
The E3ME model was used to assess the macro-economic and sectoral economic impacts
of the policy options regarding LEV incentives. A detailed description of this model is
provided in Annex 4.
In the policy scenarios different incentives for LEV were considered in addition to the
EU-wide fleet CO2 target. The analysis was done for the scenario TL30c/25v, combining
options TLC30 (cars) and TLV25 (vans)197
. As regards the LEV definition, the options
LEVD_25 (cars) and LEVD_40 (vans) were chosen for this analysis. As regards the LEV
mandate/benchmark level, two options (LEV%_A and LEV%_B, see Section 5.3.2.2)
were modelled. The scenarios modelled are summarised in Table 49.
Table 49: Overview of scenarios modelled with E3ME for assessing the macro-
economic impacts of various options regarding LEV incentives
E3ME scenario Option for EU-wide
fleet CO2 target level
Option for LEV incentive definition
and level
Cars Vans
TL0 (Baseline) TLC0 and TLV0 - -
LEV_1
TLC30 and TLV25
LEVD_25,
LEV%_A
LEVD_40,
LEV%_A
LEV_2 LEVD_25,
LEV%_B
LEVD_40,
LEV%_B
All the modelled scenarios assume that only the transport sector undergoes changes due
to the new CO2 target level and the LEV incentives. Compared to the baseline, the other
sectors do not undertake higher efforts to decrease GHG emissions or increase energy
savings. In this way, it is possible to isolate the macro-economic effects of the specific
policy.
In all scenarios, government revenue neutrality is assumed. The implementation of the
new CO2 targets reduces petrol and diesel consumption, which are commodities upon
which taxes are levied in all Member States. This is compensated, in all scenarios, by a
proportional increase of VAT rates, and hence, VAT revenues.
6.5.4.1.1 GDP impacts
Table 50 shows the projected GDP impact for the EU28 for the scenarios LEV_1 and
LEV_2, and for the scenario TL30c/25v (see Section 6.3.2.2.3.1), which has the same
EU-wide fleet CO2 targets, but does not foresee additional LEV incentives compared
with the baseline. The results shown are based on the assumption that the battery cells
used in electric vehicles are imported in the EU from third countries.
E3ME projects small positive GDP impacts for the LEV scenarios assessed, slightly
more positive for the scenario with the lower mandate/benchmark levels (LEV_1).
197 Macro-economic impacts would be very similar when combining options TLC25 (cars) and TLV25
(vans).
138
Setting LEV incentives also drives marginal improvements with respect to the scenario
TL30c/25v starting from 2030 onwards.
Table 50: Impact on GDP (EU-28) of different options regarding the LEV incentives
– battery cells imported (E3ME model)
2025 2030 2035 2040
TL0 (Baseline) 16,018,660 17,087,725 18,381,955 19,892,587
TL30c/25v 0.00% 0.02% 0.03% 0.05%
LEV_1 0.00% 0.03% 0.04% 0.06%
LEV_2 -0.01% 0.02% 0.04% 0.06%
As under the LEV policy options increases also the market penetration of electrically
rechargeable vehicles compared to the TL30c/25v scenario, it is relevant to consider the
impact of battery cells being manufactured either inside or outside the EU.
Table 51 presents the results under the assumption that the battery cells used in electric
vehicles are manufactured in the EU. It shows that the GDP increase is higher in the LEV
policy options. In this case, the higher LEV mandates/benchmarks (LEV_2) lead to
slightly higher positive impacts.
Table 51: Impact on GDP (EU-28) of different options regarding the LEV incentives
- battery cells manufactured in EU (E3ME model)
2025 2030 2035 2040
TL0 (baseline) 16,022,952 17,094,332 18,391,086 19,901,703
LEV_1 0.00% 0.04% 0.05% 0.05%
LEV_2 0.00% 0.04% 0.06% 0.06%
Interestingly, the pattern of GDP impacts of the different LEV incentive options is quite
similar to those estimated for the different CO2 targets (see Section 6.3.2.2.3.2).
On the positive side, there is an expansion of the automotive supply chain translated into
increases in production in sectors such as rubber and plastics, metals and electrical and
machinery equipment sectors reflecting the impact of increased demand from the
automotive sectors for batteries and electric motors, while the automotive sector itself
sees a small decrease in value added due to the decreased use of combustion engines in
its cars. Similarly the power and hydrogen supply sectors see production increase,
reflecting increased demand for electricity and hydrogen to power EVs, while the
petroleum refining sector sees lower production.
139
Table 52 shows the main impacts on output by the most affected sectors in 2030 for the
scenarios with the conservative assumption that all battery cells are imported from
outside the EU. The other sectors see smaller but positive impacts due to the projected
increased overall economic output.
140
Table 52: Impact on 2030 output (M€ in baseline and % change from baseline for
other scenarios) for the most affected sectors (EU-28) of different options regarding
the LEV incentives - battery cells imported (E3ME model)
TL0 (M€) TL30c/25v LEV_1 LEV_2
Petroleum refining 410,422 -1.1% -1.3% -1.2%
Automotive 1,076,972 -0.1% -0.6% -0.9%
Rubber and plastics 317,932 0.4% 0.4% 0.4%
Metals 1,044,999 0.3% 0.3% 0.2%
Electrical equipment 1,091,185 0.9% 0.5% 0.7%
Machinery equipment 581,955 0.2% 0.3% 0.3%
Electricity, gas, water,
etc. 1,124,221 0.3% 0.6% 0.7%
In case that the battery cells are manufactured in the EU, the electrical equipment sector
output would show an increase of 0.6% and 0.9% with respect to the baseline in LEV_1
and LEV_2, respectively.
6.5.4.1.2 Employment
As shown in Table 53, the scenarios assessed show small positive changes in the number
of jobs across the EU-28 compared to the baseline.
Table 53: Impact in terms of total employment (in thousands of jobs, EU-28, and %
change to the baseline) of different LEV incentive options - battery cells imported
(E3ME model)
N of jobs (000s) 2030 2035 2040
Baseline 230,207 225,871 223,148
TL30c/25v 0.01% 0.05% 0.07%
LEV_1 0.01% 0.03% 0.05%
LEV_2 < 0.01% 0.02% 0.02%
The results shown are based on the assumption that battery cells used in electric vehicles
are imported in the EU from third countries and thus results would be more positive if the
EU were to develop its own battery sector.
At sectoral level, similar conclusions as for the impacts on the output can be drawn. The
small positive employment impacts mainly occur in sectors supplying the automotive
sector as well as the power sector, while the petroleum refining and automotive sectors
itself see a small negative effect. It can be noted that all the effects are slightly higher for
LEV_2 with respect to LEV_1.
Table 54 shows the employment impact breakdown by sector, in the year 2030, under the
conservative assumption that all battery cells are produced outside of the EU.
141
Table 54: Impact in terms of employment in the most affected sectors (in thousands
of jobs, EU-28) of different LEV incentive options - battery cells imported (E3ME
model)
2030 Baseline
(number of
jobs, 000s)
Change from baseline
(%)
Change from
baseline (number of
jobs, 000s)
LEV_1 LEV_2 LEV_1 LEV_2
Petroleum refining 151 -0.4% -0.3% - 0.6 - 0.5
Automotive 2,454 -0.5% -0.8% - 12.3 - 19.6
Rubber and plastics 1,776 0.4% 0.4% 7.1 7.1
Metals 4,288 0.1% 0.1% 4.3 4.3
Electrical equipment 2,451 0.2% 0.3% 4.9 7.4
Machinery equipment 2,506 0.1% 0.1% 2.5 2.5
Electricity, gas, water,
etc. 2,852 0.3% 0.4% 8.6 11.4
Other sectors 213,731 0.0% 0.0% 15 20
As mentioned in Section 6.3.2.2.3.3, external studies assessing the possible impacts of an
accelerated uptake of low- and zero-emission vehicles also estimate an increase in overall
employment.
By contrast, a study assessing the impact of a much more drastic and abrupt policy
change compared to all the options analysed in this IA, i.e. a complete ban of
conventional powertrains by 2030 in Germany198
unsurprisingly concludes that jobs in
SMEs are particularly at risk due to difficulties in developing alternative technologies
within such a short time period. Clearly, the capacity of companies to develop new
technologies and to invest in new factories strongly depends on the length of the
transition time. It is therefore important to underline that the policy options considered in
this impact assessment are based on an incremental technology transition instead of a
rapid and very disruptive change within a short period of time. This recognises the
challenges linked to the transition to new technologies for companies and the workforce.
A more detailed summary of the external studies regarding employment and
qualifications is presented in Annex 7.
198 Falck, O. et al. (2017): "Auswirkungen eines Zulassungsverbots für Personenkraftwagen und leichte
Nutzfahrzeuge mit Verbrennungsmotoren" ifo institut, http://www.cesifo-
group.de/portal/page/portal/DocBase_Service/studien/Studie-2017-Falck-etal-Zulassungsverbot-
Verbrennungsmotoren.pdf
142
6.6 Elements supporting cost-effective implementation
6.6.1 Eco-innovations (ECO)
6.6.1.1 Future review and possible adjustment of the cap on the eco-innovation savings
(Option ECO 1)
Environmental impacts
The cap set is intended to limit to a certain extent the eco-innovation savings that
manufacturers may use to achieve their CO2 targets as those CO2 targets are primarily
intended to stimulate the uptake of more efficient 'on-cycle' technologies, whose effect
can be demonstrated in the type approval test. Without such a cap, there is a risk that the
uptake of those 'on-cycle' technologies would be reduced. While off-cycle technologies
contribute to improving vehicle efficiency, the highest potential for such improvements
still lies in the technologies whose effect is visible in the type approval test. The cap
should therefore be set so that an appropriate balance can be struck between the
incentives given to on- and off-cycle technologies respectively.
For setting the cap at the appropriate level, account needs to be taken of the
implementation of the WLTP and the uncertainties linked to the determination of the
savings of the eligible technologies. To address this uncertainty, more data will need to
become available. This includes inter alia data on the savings potential of new off-cycle
technologies such as mobile air-conditioning equipment.
Economic impacts
The 7 g CO2/km cap would allow the continuation of the current regime under WLTP
test conditions. A number of studies199
as well as the previous impact assessments
undertaken in preparation of the existing Regulations200
concluded that the eco-
innovation regime would promote the development and market deployment of eco-
innovative technologies that are less costly than some improvements of which the effect
can be demonstrated in the test procedure.
The level of the cap may have an impact on the choice of measures taken to reduce
emissions by the manufacturer. However, under the current eco-innovation regime the 7
g CO2/km cap is far from reached, so it does not appear that maintaining this cap would
constrain the uptake of more cost-effective efficiency improvements. It is however
appropriate to have the possibility to further assess and, where necessary, adjust the cap
allowing for the uptake of a cost-efficient mix of off-cycle and on-cycle technologies
over time.
Administrative burden
There would not be any additional administrative burden resulting from this option.
Social impacts
There are no direct or otherwise relevant social impacts of this option.
199 Ricardo-AEA and TEPR (2015), Evaluation of Regulations 443/2009 and 510/2011 on the reduction of
CO2 emissions from light-duty vehicles, CE Delft and TNO (2017) Assessment of the Modalities for
LDV CO2 Regulations beyond 2020, report for the European Commission (DG CLIMA)
200 SWD(2012) 213 final
143
6.6.1.2 Extend the scope of the eco-innovation regime to include mobile air-
conditioning (MAC) systems including a future review and possible adjustment
of the cap on the eco-innovation savings (Option ECO 2)
Environmental impacts
In recent years, MAC systems have become standard equipment in practically all vehicle
segments. Those systems are among the most important energy consumers on board of
light-duty vehicles201
. Making MAC systems eligible as eco-innovations would create an
incentive to improve their efficiency.
While more CO2 savings from eco-innovations would become available to manufacturers
to achieve their targets, it is expected that the environmental impact would be neutral in
case it can be ensured that real world CO2 reductions are achieved by more efficient
MAC devices.
Economic impacts
Efficiency improvements of MAC systems are expected to be a cost-effective option for
manufacturers to reduce emissions and this would benefit consumers through improved
fuel consumption of the vehicles.
Administrative burden
Inclusion of MAC systems into the eco-innovation regime would extend the scope of that
regime to technologies that were not previously eligible as eco-innovations. This does
not in itself increase the administrative burden of the eco-innovation regime in itself, i.e.
the administrative burden of preparing the applications for the applicants and the
assessment by the European Commission for preparing the Decision remains the same. It
should however be noted that the procedure for application and the certification of the
CO2 savings from eco-innovations is being simplified as part of the current
implementation work with the intention of reducing the administrative burden for the
applicants and for national type approval authorities.
Stimulus to innovation
By making MAC systems eligible as eco-innovations, incentives will be given to both
component suppliers and vehicle manufacturers to invest in further research and
development, thus enhancing innovation in this technology field.
Social impacts
A better understanding of the influence of MAC systems on the overall CO2 performance
of the vehicles would also be achieved thus providing more representative environmental
and fuel consumption data to the benefit of consumers.
6.6.2 Pooling (POOL)
6.6.2.1 Change nothing (Option POOL 0)
Environmental impacts
The evaluation study concluded that the pooling provisions have contributed beneficially
to most of the current Regulations' objectives.
201 Martin F. Weilenmann, Robert Alvarez, Mario Keller, (2010) Fuel Consumption and CO2/Pollutant
Emissions of Mobile Air Conditioning at Fleet Level – New Data and Model Comparison,
(Environmental Science and Technology, 2010, 44).
144
Economic impacts
The evaluation study showed that pooling contributed beneficially in terms of cost-
effectiveness, and competitive neutrality. Pooling facilitates compliance for those
manufacturers that produce a rather limited range of vehicles, thus helping to preserve
the diversity of the fleet.
Administrative burden
There would not be any additional administrative burden resulting from this option as the
existing procedures are well established and fairly straightforward for manufacturers to
apply.
Social impacts
The option does not present any significant social impacts.
6.6.2.2 An empowerment for the Commission to specify the conditions for open pool
arrangements (Option POOL 1)
Environmental impacts
In view of the limited number of independent manufacturers that would be eligible to
form an open pool, it is considered that any negative environmental impact would remain
very small under this option.
Economic impact
Enhancing the possibility for independent manufacturers to pool by increasing legal
certainty and improving compliance planning would contribute further to the cost-
effectiveness implementation of the legislation. Furthermore, this option would improve
the competitive neutrality of pooling by placing independent manufacturers in a position
equivalent to those of connected undertakings.
Administrative burden
The administrative burden would decrease for manufacturers as the specified conditions
would clarify the applicable rules and simplify the process of arranging open pools.
Social impacts
The option does not present any significant social impacts.
6.6.3 Trading (TRADE)
6.6.3.1 Change nothing (Option TRADE 0)
As this option implies a continuation of the current pooling regime, the impacts would be
similar as described in Section 6.6.2.1
6.6.3.2 Introduce trading as an additional modality for reaching the CO2 targets and/or
LEV mandates (Option TRADE 1)
Environmental impacts
Trading as a complementary modality to pooling should not negatively affect the
achievement of the EU-wide fleet CO2 targets. Some risks associated with the trading of
credits are rather linked to banking and borrowing (see section 6.6.3).
A trading mechanism may affect the level of investment in new technologies by each
specific manufacturer (or pool). Without a trading mechanism each manufacturer or pool
145
would have to have a certain number of energy-efficient vehicles and/or LEVs/ZEVs in
its fleet in order to comply with the set targets. By contrast, under a trading mechanism
without a limit on the amount of credits to be traded per manufacturer or pool, a
manufacturer or pool could decide to invest less in new technologies and instead buy
credits from other manufacturers to fulfil the CO2 target. Investments in energy-efficient
vehicles and/or LEV/ZEV may be limited to only some specialised manufacturers or
pools and hence possibly limit the number of manufacturers taking up innovative
technologies.
Economic impacts
Trading can reduce overall compliance costs for manufacturers by providing for
additional flexibility in meeting the targets. This in turn creates a potential additional
revenue stream.
Compared to pooling, additional flexibility is achieved as trading does not require an
upfront decision. In the case of pooling, before the end of every year manufacturers have
to notify pools for the purpose of target compliance. Trading could take place after
manufacturers are informed about the provisional calculations of their target compliance.
This would allow manufacturers to trade the exact amount of credits needed to meet their
target before the confirmation of the final compliance data.
A manufacturer or pool that over-complies with its target and has therefore invested in
more efficient vehicles can sell credits and generate additional revenue to recover its
additional investment costs, at least partially. At the same time, for another manufacturer
or pool it may be cheaper to buy credits than putting additional investments in new
technologies or paying penalties.
However, these benefits depend on the liquidity in the market and the willingness of
manufacturers and pools to trade. Given the relatively small number of manufacturers, in
particular when a pool would act as one trading entity, a few manufacturers may
dominate the market. This may limit the potential economic benefits of trading.
Administrative burden
The introduction of trading would increase the administrative burden compared to the
existing flexibilities. Trading would require both manufacturers and the Commission to
monitor all transactions, e.g. in the form of a register. While the number of market
participants would be limited, it could increase the time needed for compliance checking
as well as finalisation of annual performance data.
In the case of pools engaging in trading, changes to the pool composition over time
would have to be considered when determining the available credits.
Social impacts
If trading leads to lower overall compliance costs, this may increase the net economic
savings and benefits for consumers.
6.6.4 Banking and borrowing (BB)
6.6.4.1 Change nothing (Option BB 0)
Environmental impacts
The absence of banking and borrowing does not affect the effectiveness of the
regulations in reducing emissions in any significant way.
Economic impacts
146
Requiring compliance within the defined target year(s) - without relying on past or future
emission surpluses – creates certainty and predictability when to achieve the CO2 target
levels set. However, it limits flexibility for manufacturers or pools to comply with the
targets and may therefore increase compliance costs.
Social impacts
There are no direct or otherwise relevant social impacts of this option.
6.6.4.2 Banking only (Option BB1)
Environmental impacts
The accumulation and carry-over of credits can undermine the effectiveness of the
targets. This was experienced for example under the ZEV programme in California (see
Box 2 in Section 5.3.1). A recent study202
concluded that banked credits accumulated by
manufacturers over time put at risk that the number of ZEVs to be put on the market
would actually be met. In case of a too low LEV target and higher than expected supply
of LEV/ZEVs, banking can even result in a shift back towards conventional ICEV203
.
To avoid such negative impacts that would weaken the CO2 targets, the level of credits
banked could be capped and credits could be set to expire after a fixed time limit. In
addition, there could be rules on the maximum carry over from one compliance period to
another.
Economic impacts
Allowing the banking of credits offers manufacturers greater flexibility and can therefore
reduce their compliance costs, thus increasing the overall cost-effectiveness of the policy.
Banking rewards early movers and helps to alleviate efforts at a later stage, which may
be generally more expensive or require a more advanced shift in the powertrain
composition of their fleet. It would also allow for dealing with unexpected annual
fluctuations in a manufacturer's fleet.
Administrative burden
Administrative costs would increase as the emissions monitoring system would need to
be extended to keep track of the available and used credits. In order to ensure full
transparency each manufacturer's or pool's credit balance would have to be published
every year. In case the composition of a pool changes during a banking period, it would
be necessary to establish the correct reallocation of the credits banked as a pool to each
manufacturer in the pool.
The 2012 impact assessment204
supporting the Commission's proposals for amending the
Cars and Vans Regulations also highlighted this additional administrative complication.
202 Shulock, C. (2016): Manufacturer Sales Under the Zero Emission Vehicle Regulation (Prepared for
Natural Resources Defense Council), https://www.nrdc.org/sites/default/files/media-
uploads/nrdc_commissioned_zev_report_july_2016_0.pdf
203 Element Energy (2016): "Towards a European Market for Electro-Mobility"
204 European Commission (2012) - Commission Staff Working Document - Impact Assessment
accompanying the documents "Proposal for a regulation of the European Parliament and of the Council
amending Regulation (EC) No 443/2009 to define the modalities for reaching the 2020 target to reduce
CO2 emissions from new passenger cars" and "Proposal for a regulation of the European Parliament
and of the Council amending Regulation (EU) No 510/2011 to define the modalities for reaching the
2020 target to reduce CO2 emissions from new light commercial vehicles" (SWD (2012)213 final)
147
Social impacts
There are no direct or otherwise relevant social impacts of this option.
6.6.4.3 Banking and borrowing (Option BB 2)
Environmental impacts
Overall, similar considerations apply as for option BB1, but there are some additional
environmental impacts and risks when allowing borrowing. These relate in particular to
manufacturers not being able to balance out a negative amount of credits at the end of the
scheme's duration. 205
As for banking, negative impacts could be limited by defining a
maximum amount of credits that can be borrowed. In addition, borrowing could be
limited to one compliance period in order to avoid that targets are not complied with.
Economic impacts
Banking and borrowing would give additional flexibility to manufacturers as compared
to Option BB 1 in that it anticipates future credits. However, the same caveats as
discussed for Option BB 1 apply, including as regards the additional administrative
burden.
Banking and borrowing could be of particular interest for manufacturers with a less
diversified fleet which are more likely to be negatively affected by annual variations in
their fleet CO2 performance. These are however predominantly small volume
manufacturers which may in any case benefit from derogations. Large volume
manufacturers have generally a more diverse fleet without strong annual fluctuations.
A particular issue as regards borrowing could arise in case a manufacturer that has been
borrowing credits to be used in future compliance periods would go out of business. This
would create serious problems of liability for compensating the credit deficit for that
period.
Social impacts
There are no direct or otherwise relevant social impacts of this option.
6.6.5 Niche derogations for car manufacturers (NIC)
6.6.5.1 Change nothing (Option NIC 0)
Environmental impacts
The main concerns identified around the current system of niche derogations are the risks
of reduced effectiveness of the targets. Currently only one-third of the eligible
manufacturers makes use of niche derogations, covering only one fifth of the sales of all
manufacturers eligible for these derogations.206
The environmental impact of the
derogation has therefore been limited so far.
(http://eur-lex.europa.eu/resource.html?uri=cellar:70f46993-3c49-4b61-ba2f-
77319c424cbd.0001.02/DOC_1&format=PDF) 205 CE Delft and TNO (2017) Assessment of the Modalities for LDV CO2 Regulations beyond 2020, report
for the European Commission (DG CLIMA)
206 Ricardo-AEA and TEPR, 2015: "Evaluation of Regulation 443/2009 and 510/2011 on the reduction of
CO2 emissions from light-duty vehicles" (report for the European Commission, DG CLIMA)
148
However, if all eligible manufacturers would use niche derogations, the negative impact
on the CO2 reductions achieved under the Regulation would increase significantly and
would reduce the effectiveness of the Regulation.
Furthermore, under this option, no further efficiency improvement would be required for
those eligible manufacturers for the period post-2021.
Economic Impacts
The niche derogation regime has some drawbacks in terms of competitive neutrality.
Niche manufacturers are competing with those that are not eligible for the derogation in
the same market segments. However, most of the niche manufacturers currently present
on the EU market are major global manufacturers but with relatively small sales in the
EU. This may result in a distortion of the market and may provide new entrants in the EU
market with a competitive advantage207
.
Furthermore, very few of the potentially eligible manufacturers have so far made use of
the derogations and most of them have emission levels similar to their 'fleet-wide target
under the non-derogated regime. For those, there are limited economic benefits from
seeking a niche derogation.
In addition, the use of the year 2007 to set manufacturer specific emissions baseline has
distorting effects and penalizes early action. The higher its 2007 emissions, the larger the
benefit for a manufacturer of making used of the niche derogation. Hence, most of the
manufacturers which have applied for a niche derogation had emissions in 2007 above
the fleet-wide average.
Social impacts
There are no direct or otherwise relevant social impacts of maintaining the niche
derogations.
6.6.5.2 Set new derogation targets for niche manufacturers (Option NIC 1)
Environmental impacts
By setting new targets for niche manufacturers during the period 2022-2030, based on
the same reduction percentage as for the overall EU-wide fleet target (taking the 2021
targets defined for each niche manufacturer individually as the starting point), emissions
from those manufacturers will be further reduced in line with those of the fleet.
As the target levels get stricter, the absolute difference (in g CO2/km) between the niche
targets and the 'default' specific emission targets (without derogation) will get smaller. As
a result, the impact of the derogation on the overall emission reduction will become more
limited.
On the other hand, a tightening of the specific emission targets may cause more niche
manufacturers to apply for this derogation. This would risk reducing the effectiveness of
the legislation, as indicated in the analysis of option NIC 0.
Economic impacts
The same risks with regard to market distortion between niche and other manufacturers
apply as indicated for option NIC 0.
207 CE Delft and TNO (2017) Assessment of the Modalities for LDV CO2 Regulations beyond 2020, report
for the European Commission (DG CLIMA)
149
Social impacts
There are no direct or otherwise relevant social impacts of this option.
6.6.5.3 Remove the niche derogation (Option NIC 2)
Environmental impacts
Removing the niche derogation would make all car manufacturers responsible for more
than 10,000 registrations per year subject to the EU-wide fleet target, taking into account
the approach applied regarding the distribution of effort, see Section 5.2.
This option would remove the risk of a weakening of future targets by a more extensive
use of this type of derogation. It would also lead to additional emission reduction from
the potentially eligible manufacturers compared to option NIC 1208
.
Economic impacts
This option would contribute to remove the market distorting effects of the niche
derogation and ensure a more level playing field among manufacturers.
Furthermore, half of the currently eligible eight niche manufacturers do not currently
need the derogation and could comply with the "default" regime. For the remaining half,
removing the possibility of a niche derogations may increase the cost of compliance. This
could to some extent be compensated through the use of other current flexibilities such as
pooling or eco-innovations. Half of the eligible manufacturers are members of pools as
they belong to a group of connected manufacturers and all of them are connected to
major manufacturer groups on the global market.
Administrative burden
Removing the niche derogation for car manufacturers would simplify the architecture of
the Regulations and streamline the approach taken for cars and vans. It would reduce the
number of derogation applications to be dealt with, which would slightly lower the
overall administrative costs of the Regulation.
Social impacts
There are no direct or otherwise relevant social impacts of niche derogations.
208 According to the 2015 and 2016 emissions monitoring data, 4 manufacturers out of the 5 having
derogations would have missed their "default" specific emission target in those years.
150
6.7 Governance
6.7.1 Real-world emissions (RWG)
6.7.1.1 Change nothing (Option RWG 0)
A number of sources from the US209,210
indicate that the combination of a laboratory
based test procedure and market surveillance instruments can be to a certain extent
sufficient to ensure a limited, constant and stable gap, i.e. of around 20% in that specific
jurisdiction. It can be then accounted for when assessing the impact of specific target
levels.
The introduction of the new WLTP test procedure as of September 2017 and of a revised
type approval framework is expected to reduce significantly the gap currently observed
in the EU. Although the new system has been carefully designed to this end, it is
anticipated that a certain gap will remain as underlined in the opinion of the Scientific
Advisory Mechanism211
.
The lead time required to address any remaining gap solely by extensive changes of the
reference test procedure developed in the context of UNECE is expected to be long with
respect of the timeframe of the proposed legislation.
6.7.1.2 Option RWG 1: Collection, publication, and monitoring of real world fuel
consumption data
Environmental impact
A robust and regular monitoring and publication framework for real-world fuel
consumption data will allow the verification of the assumptions made regarding the
divergence between the test procedure values and the average real world emissions (see
Section 6.1). Significant divergences can in turn trigger a review of the testing
framework and where appropriate the CO2 emission standards themselves. This policy
option is therefore expected to have an important positive environmental impact.
The publication of real world fuel consumption data would contribute to raising public
awareness of fuel economy measures and promote the market up-take of CO2 reducing
technologies. A co-benefit would therefore be secured through the resulting market effect
and competition among manufacturers for vehicles and technologies delivering
significant fuel savings on the road.
The environmental effectiveness of this policy option would be linked to the quality of
the available data.
Economic impact
The economic impact of this option is mainly associated to the administrative burden to
establish and operate a monitoring mechanism which will strongly depend on its actual
design. The real-world fuel consumption data can be sourced or estimated by different
means.
209 Midterm Evaluation of Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate
Average Fuel Economy Standards for Model Years 2022-2025, EPA, CARB, NHTSA 2016
210 Greene D.L. et al, How Do Motorists' Own Fuel Economy Estimates, How Do Motorists' Own Fuel
Economy Estimates Compare with Official Government Ratings? A Statistical Analysis, Baker
Reports 2015
211 https://ec.europa.eu/research/sam/pdf/sam_co2_emissions_report.pdf
151
If the standardised 'fuel consumption measurement device' becomes mandatory in new
cars through type approval, the Commission could propose to retrieve such data for
example by means of reporting or publication obligations for manufacturers, periodic or
ad-hoc inspections, remote sensing or a combination thereof. This would be subject to a
dedicated analysis and assessment to underpin new regulatory provisions on this issue.
Alternatively, ad hoc periodic test campaigns covering representative fleet samples could
be carried out. In this case, the Commission would carry out internal and external
specific studies.
Administrative burden
The administrative costs would depend on the set-up of the data retrieval and processing
system. For example in case of Commission studies based on ad hoc periodic test
campaigns, the administrative costs would be limited to the costs for carrying out the
studies and to process, analyse and report the data.
Social impact
The impact is expected to be positive for consumers as this option will provide
consumers with information on real world emissions and fuel consumption and allow
them to assess how those values compare to the fuel consumption of their own vehicles.
6.7.2 Market surveillance (conformity of production, in service conformity) (MSU)
6.7.2.1 Option MSU 0 – no change
Environmental impact
The verification by manufacturers of the correctness of the monitoring data provided by
Member States is an essential step in ensuring legal certainty for the manufacturers in the
process of determining compliance with their specific CO2 emission targets.
However, while the current approach may lead to the identification (and subsequent
remediation) of unjustified deviations from the type approved CO2 emissions of vehicles
placed on the road, it is nevertheless mainly dependent on information provided by the
manufacturers.
This creates a risk that divergences in the CO2 data used for assessing compliance may
go undetected. Where this happens it may reduce the effectiveness of the Regulations in
ensuring that the reductions foreseen are actually achieved.
Economic impact
The verification by manufacturers of the CO2 data is currently optional. In case of no
verification by the manufacturer, the data is considered correct. Should the Commission
be informed of errors, it may however proceed with further checks in conjunction with
measures taken by Member States and may also to abstain from confirming a
manufacturer's performance in meeting its targets as long as the data is not confirmed to
be correct (this is the case with the Volkswagen pool data for 2014 and 2015).
Administrative burden
The administrative costs would depend on the set-up of the data retrieval and processing
system. For example in case of Commission studies based on ad hoc periodic test
campaigns, the administrative costs would be limited to the costs for carrying out the
studies and to process, analyse and report the data.
Social impacts
152
The lack of an effective independent verification of the CO2 data may result in deviations
going undetected. This may in turn lead to less representative data on CO2 emissions and
fuel consumption being available to consumers.
6.7.2.2 Option MSU 1: Obligation to report deviations and the introduction of a
correction mechanism
This option assumes a mechanism is in place to systematically and formally detect
deviations from the type approval values as part of the conformity of production tests
(type approval legislation on emissions testing) or during verification tests of vehicles in-
service (to be established, e.g. as part of the type approval framework).
Environmental impacts
Obligations placed on national authorities to systematically report deviations to the
Commission, and on the Commission to correct the CO2 data should contribute to
ensuring reliable and representative CO2 data. This would contribute to improving the
effectiveness of the Regulation by ensuring that the CO2 reductions foreseen are actually
achieved.
Economic impacts
The new requirement national authorities to report to the Commission any deviations
found, regardless of whether they are detected as part of a formal type approval
procedure or on the basis of independent verifications would allow the Commission to
take further steps in ensuring that such deviations are penalised and remediated. This
would avoid that such deviations undermine the CO2 reduction objectives and hence the
effectiveness of the regulations. It would also prevent the distorting effect such
deviations may have on the competition among different manufacturers.
The reporting requirement combined with the possibility for the Commission to correct
the average specific CO2 emissions of a manufacturer in the case of serious and
unjustified deviations from the type approval values would serve as a strong deterrent
from placing vehicles on the market with deviating CO2 and fuel consumption values. It
could be expected that the mere possibility of being subject to such corrections would in
itself reduce the risk for such deviations occurring systematically.
Administrative burden
The new reporting obligation would incur an administrative burden primarily on type
approval authorities. They would have to make available to the Commission in a
systematic manner any deviations found together with a report on the remedial measures
imposed.
However, it can be assumed that this data has already to be documented and reported for
the purpose of the type approval legislation. For manufacturers the administrative burden
could slightly increase as there would be a stronger incentive to actively verify the
monitoring data than is currently the case. It would require further assessment of the data
by the Commission as well as follow-up of in terms of correction of the CO2 data set.
Social impacts
An effective independent verification and correction regime should contribute to
ensuring that consumers have access to reliable CO2 and fuel consumption data.
153
7 COMPARISON OF OPTIONS
The options considered are compared against the following criteria:
Effectiveness: the extent to which different options would achieve the objectives;
Efficiency: the benefits versus the costs; efficiency concerns "the extent to which
objectives can be achieved for a given level of resource/at least cost".
The coherence of each option with the overarching objectives of EU policies: ;
The compliance of the options with the proportionality principle
Table 55 summarizes the assessment of each option against these criteria, following the 5
categories of issues considered in the Impact Assessment.
The effectiveness of the policy options considers the extent to which the set objectives
are achieved. As presented in Section 4, the objectives considered are the following.
General policy objective
The general policy objective is to contribute to the achievement of the EU's commitments
under the Paris Agreement (based on Article 192 TFEU) and to strengthen the
competitiveness of EU automotive industry.
Specific objectives
1. Contribute to the achievement of the EU's commitments under the Paris
Agreement by reducing CO2 emissions from cars and vans cost-effectively;
2. Reduce fuel consumption costs for consumers;
3. Strengthen the competitiveness of EU automotive industry and stimulate
employment.
While CO2 emission standards for cars and vans for the period post 2020 are a key
element to achieve the above objectives, they cannot deliver on them on their own. A
number of other complementary policy measures – both on the supply and demand
side – have already been or need to be put in place at EU, national, and regional/city
level. These include investment in the necessary refuelling/recharging
infrastructure, investment in research, development and innovation for battery
technologies (both current and next generation), policies supporting deployment
through public procurement (Clean Vehicles Directive), policies supporting the
internalisation of external costs linked to emissions (Eurovignette Directive),
national incentive schemes and local level actions (see Section 1.1 for more details).
While for most of the issues a preferred option has been identified, as mentioned below,
in the cases of the target levels and the LEV/ZEV incentives, trade-offs between the
various options are described.
154
Table 55: Summary of key impacts expected
Key impacts expected
O
Strongly negative Weakly negative No or negligible
impact
Weakly positive Strongly positive
1. EMISSION TARGETS
METRIC
Options considered Effectiveness Efficiency Coherence Proportionality –
added value
Tank-to-Wheel (no change)
Well-to-Wheel
Embedded emissions
Mileage weighting
TIMING
New CO2 targets apply in
2030
New CO2 targets apply in
2025 and in 2030
New CO2 targets defined for
each year 2022-2030
CO2 TARGET LEVEL FOR CARS
TLC20 O
TLC25
TLC30
TLC40
TLC_EP40
TLC_EP50 O
CO2 TARGET LEVEL FOR VANS
TLV20 O
TLV25
TLV30
TLV40
TLV_EP40
TLV_EP50
2. DISTRIBUTION OF EFFORTS (cars and vans)
No change: mass, current
slope (DOE0)
O
Mass, equal reduction effort
for all (DOE1)
O O
Footprint, equal reduction
effort for all (DOE2)
O O
No utility parameter,
uniform target for all
(DOE3)
O O
No utility parameter, equal
% reduction for all (DOE4)
O O
3. ZEV / LEV INCENTIVES
TYPE OF ZEV / LEV INCENTIVE – CARS
No incentive O O O
Mandate
Crediting system (two way
adjustment)
Crediting system (one way
adjustment)
O
155
Options considered Effectiveness Efficiency Coherence Proportionality –
added value
TYPE OF ZEV / LEV INCENTIVE - VANS
No incentive O O O
Mandate
Crediting system (two way
adjustment)
Crediting system (one way
adjustment)
O
4. ELEMENTS FOR COST-EFFECTIVE IMPLEMENTATION
ECO-INNOVATION
Future review and possible
cap adjustment
Extend scope to mobile air
conditioning systems, incl.
future review and cap
adjustment
POOLING
Enhanced pooling O
TRADING
Trading O O
BANKING AND BORROWING
Banking O O O
Banking and borrowing O O
NICHE DEROGATION
New derogation target for
niche manufacturers
O
Remove derogation for
niche manufacturers
O O
5. GOVERNANCE
REAL-WORLD EMISSIONS
Collection, publication and
monitoring of real world
fuel consumption data
MARKET SURVEILLANCE
Obligation to report
deviations and correction
mechanism
156
7.1 Emission targets
7.1.1 Emission target - Metric
As described in Section 6 of this IA, the main distinction in the impacts of the different
options for the metric of the CO2 target lies in their coherence with other policies and in
the additional complexity and administrative burden they might cause, compared to their
added value.
The Tank-to-Wheel (TTW) approach, by focusing on reducing tailpipe CO2 emissions
from the light duty vehicle sector, is considered fully coherent with the other instruments
contributing to the EU's climate and energy policy, including the EU ETS, the Effort
Sharing Regulation, the fuels policy, including the proposal for a revised Renewable
Energy Directive (RED II), as well as policy initiatives taken in the transport sector. The
risk of double regulation will be minimised.
The same applies for the option of enhancing the TTW approach through mileage
weighting. However, this would require establishing weighing factors for different
vehicle categories and monitoring mileage over time, which would be costly and highly
burdensome given the expected limited benefits in additional CO2 emission reductions
achieved.
As explained in Chapter 6, both a Well-to-Wheel (WTW) and embedded emissions
metric would lead to double regulation, interfering with the EU ETS and/or EU fuels
policy. Furthermore, a switch to a WTW or embedded emissions metric would lead to
confusion in terms of responsibilities and liabilities, making vehicle manufacturers
accountable for emissions occurring outside their sector. Such approaches also risks
creating additional burden, in particular in terms of monitoring and reporting obligations.
The choice of the metric for the CO2 targets would in principle not affect the
effectiveness of the policy, in particular with regards to the achievement of the specific
objective to reduce CO2 emissions. However, different metrics may have different
impacts on the sources and sectors of CO2 emissions associated with vehicles, i.e. the
vehicle itself during use, the fuel/electricity sector, or vehicle manufacturing.
Similarly, the options considered could in principle all be equally efficient as the costs
and benefits will be largely determined by the target level and by how the efforts are
distributed across the sectors concerned. However, they clearly differ in terms of the
associated administrative costs.
The preferred option for the emission target metric is thus to maintain the Tank-to-
Wheel (TTW) approach with targets set in g CO2/km for the sales-weighted average
of the fleet.
7.1.2 Emission targets – timing
The option with new targets applying in 2025 and in 2030 scores very high on all criteria.
Setting CO2 targets also in 2025 would provide a clear and early signal for the
automotive sector to increase the market share of LEV/ZEV in the EU from the early
2020s on. It would incentivize the European automotive sector to swiftly upscale their
investments in key technologies as batteries and benefit early on from the economies of
scale and learning. As other jurisdictions – like China and California – are going forward
with strong incentives for LEV/ZEV, there is a risk that – without a 2025 target –
European automotive industry may fall behind and foreign competitors gain a cost
advantage.
157
At the same time, it would leave sufficient flexibility to manufacturers to phase in more
efficient technologies and hence give sufficient lead time for the automotive supply chain
to adapt.
It is in particular effective in achieving the first specific objective by reducing CO2
emissions early. As a result, cumulative emission reductions are expected to be higher as
described in Section 6. This option is also coherent with the broader climate and energy
policy by ensuring that the cars/vans policy will contribute delivering on time on the
annual objectives set in the broader context of the proposed effort sharing decision for
2030, while leaving flexibility for manufacturers as regards the trajectory to follow in the
intermediate years.
Postponing the new CO2 targets for cars and vans until 2030 causes the policy to be less
effective in reducing CO2 emissions. Given the long fleet renewal time, the introduction
of more efficient vehicles only around 2030 would result in higher overall emissions
from road transport emissions for many years thereafter.
This option is also less effective against the second specific objective as consumers
would miss out on significant fuel savings in the period up to 2030. This would also
increase the costs of the policy and in turn negatively influence its efficiency.
All of this makes this option not fully coherent with the broader climate and energy
policy as the cars and vans CO2 targets are one of the key elements contributing to
achieving the 2030 climate and energy objectives.
The option of setting annual targets, while being highly effective in reducing CO2
emissions and in steering the market uptake of more LEV and ZEV, would leave
manufacturers very little flexibility during any year of the period. Compared to the
limited added value it may bring, such an annual compliance requirement seems overly
restrictive.
The preferred option is thus to set new CO2 targets for cars and vans applying from
2025 and stricter targets applying from 2030 on.
7.1.3 Emission targets – level for cars
The options considered cover a range of target level trajectories up to 2030. As described
in Section 6 of this IA, the stricter the target levels set, the higher their effectiveness in
achieving the specific objective of reducing CO2 emissions. The additional reductions in
2030 compared to 2005 on top of the baseline range from 4 percentage points (TLC20) to
11.4 percentage points (TLC_EP50). In 2040, the range is from 19.1 percentage point
(TLC20) to 30.3 percentage points (TLC_EP50).
The co-benefits in terms of reduced air pollution also increase with the stringency of the
target, leading to additional reductions of NOx and PM2.5 emissions by 2030 from 2020
compared to the baseline ranging from 2 percentage points (TLC20) to 8 percentage
points for NOx and 10 percentage points for PM2.5 (TLC_EP50).
Stricter targets will also increase the market uptake of LEV and ZEV accelerating
innovation and reaching economies of scale. However, the change in the fleet
composition will be rather gradual compared to the baseline. For instance, for a 30%
reduction target, the share of gasoline and diesel cars in 2030 will still be almost three
quarters of the total new feet compared to slightly more than 80% in the baseline. Only at
the higher target levels, the change would be more rapid. For the most ambitious option
considered, the gasoline and diesel car share would decline to a little more than 55%.
158
All options considered deliver benefits for consumers. The 'total cost of ownership'
reflects the change in costs from an end-user perspective of an 'average new car'. As the
fleet-wide target levels get higher, the capital costs increase as well as the fuel cost
savings. Highest net savings for the total cost of ownership can be realised with a
reduction target of 25% or 30%. For these options, the net savings for a 2030 'average
new car' are about 1,400 EUR considering a lifetime of 15 years and around 800 EUR for
the first user during the first 5 years after registration of the vehicle.
The net savings for the second user increase with the stringency of the targets and are
higher than those for the first users, benefiting the lower income groups of consumers.
The net savings for the second user are higher for a 30% reduction target than for the
25% option.
As regards the macro-economic impacts, the results show a very small positive impact
for the policy scenarios compared to the baseline in terms of EU-28 GDP. It is projected
that higher CO2 targets trigger increased consumer expenditure as well as increased
infrastructure investment. This combined impact, as well as a reduction in imports of
petroleum products, would result in an overall positive impact on GDP and reduce the
import dependency of the EU economy.
On the one hand, at the sectoral level, there would be an expansion of the automotive
supply chain, which would translate into a production increase in sectors such as rubber
and plastics, metals and electrical and machinery equipment. This reflects the impact of
increased demand from the automotive sectors for batteries and electric motors.
On the other hand, the automotive sector itself would see a small decrease in value added
due to the decreasing use of combustion engines in cars. Similarly, the power and
hydrogen supply sectors would increase production reflecting increased demand for
electricity and hydrogen to power electric vehicles, while the petroleum refining sector
would see a lower production. With more stringent target levels, these effects would
become slightly more pronounced.
With more ambitious CO2 target levels resulting in an increase in economic output, there
is also a marginal increase in the number of jobs across the EU-28 compared to the
baseline. The number of additional jobs also increases slightly over time. The main
drivers behind the GDP impacts also explain the employment impacts. The exact
magnitude of the employment impacts will depend among others whether the battery
production will take place in the EU or whether batteries will be imported from Asia.
Additional enabling measures for EU investments into battery production would amplify
the positive employment effects.
Shifts in sectoral economic activity will also affect the skills and qualifications required
in the automotive sector. Given the gradual shift to electrified powertrains and the
expected relatively high share of plug-in hybrid vehicles until 2030, there will be
sufficient time for re-skilling and up-skilling.
In light of the analysis carried out, the target level of 20% scores less positively on
effectiveness than 25% and 30% in particular in view of the CO2 emission reduction and
the lower deployment of ZEV/LEV and fuel efficient technologies. Higher target levels
of 40% and above score less positively with regards to the net savings for consumers
over 15 years and over the first 5 years. However, they lead to higher market uptake of
ZEV/LEV and more net savings for the second owners.
159
Looking at the efficiency of the options from a societal perspective, the analysis shows
that the highest net savings212
can be realised at target levels of 25% and 30% in both
years 2025 and 2030. However, when considering the CO2 external costs, the 30%
scenario provides higher benefits than 25%. The 50% scenario delivers no net savings, as
the highest target levels lead to significantly higher manufacturing costs. The 40% and
50% also scores lower with regards to proportionality in view of the higher
manufacturing costs.
In terms of coherence, a key consideration is related to the way the car CO2 targets would
deliver a cost-effective contribution to reducing emissions of the sectors covered by the
Effort Sharing Regulation by 2030. In this respect, higher targets enhance the capabilities
of Member States in meeting their target under the Effort Sharing Regulation, taking into
account also that other sectors covered by this Regulation, such as agriculture and freight
transport have a lower than average cost–effective emission reduction potential.
However, the highest targets would score less positively against the coherence criteria in
view of the increased manufacturing costs.
7.1.4 Emission targets – level for vans
Regarding the effectiveness and proportionality of the emission targets for vans, similar
considerations apply as for cars. The higher the target levels set, the higher their
effectiveness in achieving the specific objective of reducing CO2 emissions and the co-
benefits in terms of air quality. Higher targets will also increase the market uptake of
LEV and ZEV accelerating innovation and reaching economies of scale. Similar
conclusions can also be drawn up as regards the macro-economic impacts including on
employment.
As regards the benefits for consumers, the highest net savings over 15 years and 5 years
and for the second user occur in the case of the 40% reduction level.
In terms of efficiency, the highest net savings from a societal perspective are found for
options TLV40 followed by TLV30.
In terms of coherence with the overall climate and energy policies, TLV30 and TLV40
are both scoring somewhat better than the other options given the emission reductions
and societal net savings delivered.
7.2 Distribution of efforts (cars and vans)
The key specific objective considered to assess the effectiveness is to ensure a fair
distribution of effort among the manufacturers, thus avoiding that competition is
distorted, without undermining the overall emission reduction potential.
As described in Section 6, for cars, the first three options, which are based on a limit
value curve, are comparatively less effective as they tend to lead to higher costs for
manufacturers of smaller vehicles, both in absolute and in relative terms. This is
especially the case for the footprint-based option.
For vans, the options based on footprint and with a uniform target result in significantly
higher manufacturing cost increases for manufacturers of larger vehicles.
Another important element for the analysis is the consideration of the proportionality
with regards to the flexibility left for manufacturers in adapting their future fleet
212 The net savings observed are the result of differences in capital/manufacturing costs, fuel cost savings
and operational & maintenance costs.
160
composition depending on consumer demand. For both cars and vans, the options DOE3
and DOE4 without a utility parameter leave less room for changes in the fleet
composition, and may cause greater challenges for manufacturers producing a less
diversified fleet of mainly larger or mainly smaller vehicle models.
As regards the proportionality, maintaining a mass based approach compared to footprint
would be the simplest option from an administrative point of view. Changing the utility
parameter would also create uncertainty for the future.
As regards the efficiency, as explained in Section 6.4, the overall cost is hardly affected
by the approach chosen to distribute the EU-wide fleet target across manufacturers.
However, the absence of a utility parameter would reduce the flexibility of
manufacturers, creating risks to increase the costs of the policy.
As regards internal coherence, the approach of keeping the slopes of the limit value curve
as currently established in the Cars and Vans Regulation could be questioned. These
slopes were specifically linked to the currently applicable targets for 2020/2021. With the
switch to WLTP and the new targets to be set for post-2020, there seems to be no sound
basis for simply maintaining them. For the other options considered, no other issues
regarding the internal or external coherence were noted.
The preferred option for distributing the EU-wide fleet targets across individual
manufacturers from 2025 on, is to use a limit value curve, with the manufacturer
specific targets depending on the average WLTP test mass of the vehicles. The slope
of the curve should ensure an equivalent reduction effort amongst manufacturers.
7.3 ZEV / LEV incentives
7.3.1 ZEV / LEV incentives for cars
The automotive industry is crucial for Europe's prosperity and the EU is among the
world's biggest producers of motor vehicles and demonstrates technological leadership in
this sector.
However, competition is increasing and the global automotive sector is changing rapidly
with a higher number of market players from outside the EU, new innovations in
electrified powertrains, autonomous driving and connected vehicles.
In order to retain its global competitiveness and access to markets, the EU needs to react
proactively with an ambitious but realistic and cost-effective regulatory framework. This
will support technological development and influence regulatory development outside
the EU. This is particular important in the area of zero- and low-emission vehicles.
In terms of future market growth for electric vehicles, analysts expect that the global
stock could increase from around 2 million electric vehicles in 2016 to between 9 and 20
million by 2020 and could reach between 40 and 70 million electric vehicles by 2025.
These forecasts are also reflected in recent announcements by major EU car
manufacturers intending to significantly increase the share of electrified powertrains in
their portfolio to as much as 25% in 2025 for some of the largest manufacturers.
In 2016 China was by far the largest electric car market in the world with more than
twice as many registrations as the US or the EU and with very dynamic growth rates.
While the Chinese electric car market grew by more than 60% in 2016, the EU market
grew by 6% only. In 2016, Chinese car manufacturers increased their share in global
electric vehicles production from 40% in 2015 to 43%.
161
This strong position of the Chinese market and manufacturers is expected to continue. In
order to even further strengthen its competitive edge, China adopted in 2017 mandatory
quotas for "new energy" vehicles for all domestic and foreign car manufacturers that
produce for and/or import to the Chinese market. In the US, California and nine other
States have successfully established a regulatory instrument to enhance the uptake of
LEV since the early 1990s.
In the light of this policy context, the Impact Assessment is considering several options
to introduce incentives for zero- and low-emission vehicles.
The first option is a binding mandate under which each manufacturer would have
to include at least a specific share of LEV in its new vehicle fleet.
The second option is a more flexible crediting system with a two-way CO2 target
adjustment, building on and improving the current super-credits system. A
manufacturer exceeding a certain benchmark of LEV/ZEV in its fleet would be
allowed to meet a less strict CO2 target, hence relaxing the need for efficiency
improvements in internal combustion engines. However, a manufacturer whose
sales share of LEV/ZEV fleet is below the benchmark would have to meet a
stricter fleet-wide CO2 target, which limits the risk of undermining the overall
CO2 fleet-wide target. Section 6 carries out an analysis on the effects of the over
and under-achievement of the ZEV/LEV benchmark on the efficiency
improvement for conventional vehicles.
The third option is a crediting system with a one-way CO2 target adjustment
where the CO2 target will be relaxed if the benchmark is overachieved. Not
meeting the benchmark would have no consequences, i.e. the benchmark would
become voluntary.
For the LEV/ZEV mandate or benchmark levels, a range from 10 to 25% in 2025 and 15
to 35% in 2030 has been looked at, depending on the scope of the vehicles considered,
only ZEV or including LEV. The selected ranges broadly mirror the recent
announcements by many EU manufacturers as regards their expected LEV uptake for the
coming decade.
Starting from a rather low base, the accelerated uptake of LEV is expected to yield
significant economies of scale, hence bringing down vehicle costs and making LEV more
attractive for consumers and stimulating investments in infrastructure. Analysts project
that the faster the market will grow the faster vehicle costs could come down.
Design of incentives for low- and zero-emission vehicles
A binding mandate and a crediting system with a two-way CO2 target adjustment score
the highest with respect to effectiveness and coherence as they provide a clear regulatory
signal for industry to invest in LEV. This would create a larger internal market leading to
economies of scale, bringing the technology costs down at a faster pace, to the benefit of
consumers, industrial competitiveness and triggering investments in the necessary
infrastructure.
A clear regulatory signal on the future market size for LEV/ZEV will reduce the risk for
all market participants – be it car manufacturers, providers of charging infrastructure, or
consumers – and allow a faster uptake. A well-chosen regulatory signal on the future
market size – that is in line with the expectations of the car manufacturers – will make all
market participants more confident to invest into LEV/ZEV technologies and contribute
162
to solve the "chicken-and-egg" problem between vehicle manufacturers and providers of
charging infrastructure. Private and public providers of charging infrastructure will have
a more credible signal on the future charging demand and can invest with less risk.
A crediting system with a one-way CO2 target adjustment would not create a clear signal
leaving market participants less certain about the future size of the LEV/ZEV market and
therefore investment risks increase. In addition, this creates a higher risk of undermining
the environmental integrity of the regulatory system.
As regards efficiency, the analysis in Section 6 shows that the introduction of LEV
incentives leads to higher net economic savings from a societal perspective, with the
mandate providing the highest net economic savings compared to a crediting system.
However, compared to a crediting system, a binding mandate reduces the flexibility for
manufacturers to react to changes in relative costs between LEV/ZEV and conventional
technologies. If e.g. battery costs decrease faster than expected, a crediting system offers
stronger incentives to invest further in LEV/ZEVs and increase further the
competitiveness of the European automotive industry in this technology. A pure binding
mandate does not offer these flexibilities and scores therefore lower in terms of
efficiency and proportionality.
While having the advantage of being more flexible, the effectiveness and efficiency of a
crediting system will eventually depend on the level of the benchmark. In particular, if
the benchmark value is set below the level that the market expects for the future
LEV/ZEV market share, this may have negative and perverse effects on the overall
effectiveness. Take e.g. the case that the benchmark would be set at a very low level that
would be over-achieved in any case. Such a benchmark would provide no additional
incentives for the deployment of ZEV/LEV and may even allow every manufacturer to
generate such a high amount of credits with no further need to improve the efficiency of
conventional engines. There would neither be incentives for innovation in low-emission
nor in conventional technologies.
Section 6 has analysed different levels for the ZEV/LEV benchmark – based on the
modelled LEV shares for the future and broadly mirroring the recent announcements
made by several major European manufacturers. Three benchmark level options–have
been analysed for ZEV only and for ZEV and LEV together:
Table 56: Overview of ZEV/LEV benchmark level options
ZEV only ZEV and LEV
together
2025 2030 2025 2030
Levels of
the
benchmarks
10% 15% 15% 25%
15% 20% 20% 30%
20% 25% 25% 35%
The difference between the levels of benchmark is notable in terms of effectiveness and
efficiency:
A higher LEV incentive level determines a stronger market signal, incentivises
more investment on LEV and increases their market uptake, hence is more
effective.
163
As shown in Section 6, a LEV incentive increases the net savings up to a certain
level. The higher-level benchmark values, while being more effective, show
moderately lower net savings than the lower-level benchmarks.
Interaction between the LEV/ZEV crediting system and the CO2 fleet-wide reduction
level
The CO2 fleet-wide reduction level and the level of the ZEV/LEV benchmark in the case
of the crediting system will also have an impact on the efficiency of the conventional
vehicles. Setting a more ambitious LEV incentive increases the market uptake of LEV.
As a consequence, in order to comply with the CO2 fleet-wide target, lower efforts are
required to improve the efficiency of the conventional vehicles. This means that there
would be less innovation incentives for the conventional engines.
This will have to be taken into consideration as part of the wider industrial policy
when deciding the trade-off between the level of the CO2 fleet-wide target and the
parameters of the LEV/ZEV incentives i.e. (1) level of the LEV/ZEV benchmark, (2)
the ratio between the over/underachievement of the LEV/ZEV benchmark and the
credits for the adjustment of the CO2 fleet-wide target, and (3) the limits to the
adjustment itself of the CO2 fleet-wide target.
A balanced approach is needed to provide for an effective set of incentives that yields
high benefits for consumers, competitiveness, and the environment.
Targeting low- or only zero-emission vehicles?
As regards the definition of the vehicles covered by the incentives, a definition based on
LEV would incentivize a higher uptake of plug-in hybrid vehicles compared to a pure
ZEV benchmark. Further hybridisation is an important stepping stone allowing a smooth
transition towards electrified powertrains. Furthermore, the higher labour intensity of the
production of plug-in hybrid vehicles compared to conventional vehicles and ZEV would
keep employment in the car manufacturing sector.
Conclusions
The preferred option as regards the LEV/ZEV incentive mechanism for cars is a
crediting system.
A well-designed crediting system can provide a strong and credible signal for the
development of zero- and low-emission vehicles while maintaining some improvement
of the efficiency of the conventional engines beyond the 2020/2021 baseline. It will
support the competitiveness of the EU automotive industry across all technologies and to
ensure that significant benefits for consumers and environment will be achieved.
Market participants – car manufacturers, infrastructure providers, and consumers – will
invest with more confidence when there is more certainty about the future market size for
LEV/ZEV. A strong and stable home market for LEV/ZEV will be a key support for the
competitiveness of the European industry. It will allow the European industry to benefit
from a fast learning curve and economies of scale. Such a strong and large home market
will be particularly important in view of the regulatory incentives set in other key export
markets (e.g. China, California).
7.3.2 ZEV/LEV incentives for vans
The results for vans are quite different than for passenger cars in terms of overall
efficiency. Section 6 shows that for vans the option without specific ZEV/LEV
164
incentives provides higher net economic savings than the other options. For the other
assessment criteria, the same scoring applies as for cars.
The preferred option is thus not to establish an additional ZEV/LEV incentive
mechanism for vans.
7.4 Elements supporting cost-effective implementation
7.4.1 Eco-innovations
Both options to further develop the eco-innovation scheme score positively on all
criteria. The main distinction is in the effectiveness of the options.
Extending the scope to mobile air conditioning (MAC) systems – in addition to a future
review and possible cap adjustments – would further increase the effectiveness of the
policy since MAC systems have become standard equipment in practically all vehicles.
They have a significant cost efficient CO2 emission reduction potential but have so far
not been taken into account for reaching the CO2 target. Thus potential efficiency
improvements have been neglected. The extension to MAC would provide an important
incentive to improve the efficiency of this widely used technology. In addition, it would
increase the technology options available to manufacturers to cost-effectively reduce CO2
emissions, and thereby improve the overall efficiency of the policy.
The preferred option is thus to maintain the eco-innovation provisions, while
extending the scope to mobile air conditioning and allowing for a revision of the 7
g/km cap.
7.4.2 Pooling
Enhanced pooling would increase the efficiency of the policy in that independent
manufacturers would benefit from legal certainty on the possibility to form a pool. This
would help independent manufacturers to reach their specific emissions target at lower
costs. In terms of coherence it is assessed positively with respect to the single market
because it ensures a level playing field among all manufacturers.
The preferred option is thus to maintain the pooling provisions, while clarifying
how manufacturers may form open pools.
7.4.3 Trading
Trading – in addition to pooling – could slightly positively affect the policy in terms of
efficiency. By providing additional flexibility to manufacturers it could reduce overall
compliance costs and generate an additional potential revenue stream for progressive
manufacturers. In terms of coherence it is also assessed positively because it ensures a
level playing field among all manufacturers. However, where it has been introduced it
had very limited take-up but setting it up and running it would still add a significant
administrative burden.
The preferred option is thus not to introduce the possibility for trading of CO2
credits.
7.4.4 Banking and borrowing
Banking only as well as banking and borrowing could potentially increase the efficiency
by providing more flexibility and hence reducing overall compliance costs for
manufacturers.
165
However, allowing for borrowing creates the risk that manufacturers may not be able to
balance out a negative amount of credits. It also raises concerns of liability and
environmental integrity in case a manufacturer that has been borrowing credits to be used
in future compliance periods would stop its activities.
Both options also add some additional administrative burden especially by the necessity
to adding quite complex design elements.
The preferred option is thus not to introduce the possibility for banking or
borrowing of CO2 credits.
7.4.5 Niche derogations for car manufacturers
Comparing the two options on derogations for niche manufacturers shows that removing
the derogation scheme would have strong positive effects on effectiveness and
coherence. It would help to better achieve the specific policy objectives because it would
incentivise lower average specific emissions of the new car fleet of niche manufacturers
instead of possibly weakening future targets by more extensive use of this type of
derogation.
Coherence would be improved by removing a possibly market distorting element in the
current Regulation. However, a new derogation target for niche manufacturers scores
better with regards to proportionality as it would allow niche manufacturers to continue
benefitting from a derogation and hence reduce their compliance costs.
The preferred option is thus to remove the possibility for car manufacturers to be
granted a "niche" derogation.
7.4.6 Simplification (REFIT aspects)
Compared to the current Regulations, the abovementioned preferred policy options,
including on the ZEV/LEV incentives mechanism, are not expected to significantly affect
the administrative costs caused by the legislation. In addition, they are not increasing the
complexity of the legal framework.
In line with the findings of the Evaluation study, no changes in the compliance regime or
in the level of the excess emissions premium are foreseen.
Under the preferred options, a number of existing flexibilities, such as super-credits and
the 'niche' derogation, would be removed. The regulatory system will continue to provide
for flexibilities to meet the regulatory requirements. These are intended to lower the
compliance cost and most of them are offered to the regulated entities on a voluntary
basis.
Next to the ZEV/LEV incentives, where a crediting system would allow compliance
checking to be limited to the CO2 emissions target, the main new elements considered are
the governance related aspects. The preferred options for these elements are aimed to
tackle the main weakness of the current Regulations identified by the Evaluation study
and to follow-up on the call for closing the real-world gap from the Scientific Advice
Mechanism and the European Parliament. The details of how these mechanisms will
operate in practice will have to be elaborated later, and care should be taken at that stage
to limit any administrative burden or complexity.
7.5 Governance: real-world emissions – market surveillance
The collection, publication and monitoring of real world fuel consumption data as well as
an obligation to report deviations linked to a correction mechanisms would strongly
increase the effectiveness of the regulatory framework.
166
Real world fuel consumption data would allow the verification of the assumptions made
on the gap between test procedure values and the average real world emissions. In case
significant divergences are reported, corrective actions could be taken to ensure the
overall integrity and robustness of the regulatory framework. In addition, the publication
of real world fuel consumption data would strongly improve transparency for consumers
and may influence car purchase decisions towards more efficient vehicles.
The obligation to report deviations detected through improved market surveillance would
complement real world data reporting by ensuring that CO2 emissions of vehicles, as
type-approved, are correct or that these are swiftly corrected in case of deviations. Since
type-approved CO2 emission values are used for assessing CO2 target compliance
introducing such a verification and correction procedure is critical to ensure that the CO2
emission reductions objectives are actually achieved.
Both options would help consumers to benefit from higher fuel cost savings and they
would be coherent with the overall objectives of EU policies in other areas such as
vehicle type-approval and consumer protection.
The preferred option is thus to establish an empowerment for the Commission to
allow (i) the collection, publication and monitoring of real world fuel consumption
data and creating an obligation to report deviations linked to a correction
mechanisms and (ii) to correct reported CO2 emission values in case of deviations
detected through improved market surveillance.
167
8 HOW WOULD IMPACTS BE MONITORED AND EVALUATED?
The actual impacts of the legislation will be monitored and evaluated against a set of
indicators tailored to the specific policy objectives to be achieved with the legislation. A
mid-term review of the legislation would allow the Commission to assess the
effectiveness of the legislation and, where appropriate, propose changes.
Under the existing Cars and Vans Regulations on CO2 emission standards, an annual
reporting and monitoring procedure has been established. In order to assess the
compliance of manufacturers with their annual specific emissions targets, Member States
report every year data for all newly registered cars and vans to the Commission. In
addition to the type-approved CO2 emission and mass values, a number of other relevant
data entries are monitored, including fuel type and CO2 emission savings from eco-
innovations.
The Commission, supported by the European Environment Agency (EEA), publishes
every year the monitoring data of the preceding calendar year including manufacturer
specific CO2 performance calculations. Manufacturers have the opportunity to notify
errors in the provisional data, as submitted by Member States. This well-established
monitoring system constitutes an important basis for monitoring the impacts of the
legislation.
The legislation will be based on this well-established monitoring and compliance
framework. No essential elements are changed in the current framework that would add
complexity. It will therefore neither increase administrative costs for manufacturers and
competent national authorities nor enforcement costs for the Commission. A crediting
system would be integrated in the existing compliance mechanism by merely adding
another step in the methodology for calculating the performance of individual
manufacturers/pools. No additional monitoring or reporting is required.
Additional administrative costs are linked to the new governance framework, i.e. the
collection, publication and monitoring of real world fuel consumption data as well as the
obligation to report deviations and use these for correcting the emissions data. However,
in light of the importance to ensure transparency to consumers and representativeness of
monitored CO2 emission values, these costs appear well justified.
8.1 Indicators
For the specific policy objectives the following core monitoring indicators have been
identified:
Contribute to the achievement of the EU's commitments under the Paris Agreement
by reducing CO2 emissions from cars and vans cost-effectively:
o The EU-wide fleet average CO2 emissions measured at type approval will be
monitored annually on the basis of the monitoring data against the target level
set in the legislation.
o The gap between the type-approved CO2 emissions data and real world CO2
emissions data will be monitored through the collection and publication of
real world fuel consumption data as well as reporting of deviations from the
type approved CO2 emissions and corrections to the CO2 emissions data as
initially reported by Member States and corrected by manufacturers.
o Cars and vans GHG emissions will be monitored through Member States'
annual GHG emissions inventories.
168
o The costs of technologies used in the vehicles and the fuel savings will be
monitored on the basis of data to be collected from manufacturers, suppliers
and experts.
o The number and share of newly registered zero/low emission vehicles will be
monitored through the annual monitoring data submitted by Member States
against the benchmarks set in the legislation .
Reduce fuel consumption costs for consumers:
o Development in fuel cost savings will be monitored through the EU-wide
fleet average emissions as well as the collection of real world fuel
consumption data and in-service conformity checks, if available.
o The number of zero/low-emission vehicle models available on the market and
development of purchase costs over time will be monitored through publicly
available databases.
Strengthen the competitiveness of EU automotive industry and stimulate
employment:
o The level of innovation will be measured in terms of new patents by European
car manufacturers related to zero/low-emission vehicles and fuel-efficient
technologies through publicly available patents databases. Data will be
compared to past performance, both in terms of absolute numbers and relative
share against main competitors form other world regions.
o In addition to innovation activity, the competitiveness of the automotive
sector will be monitored in terms of global market share of European car
manufacturers in terms of new vehicle sales on the basis of publicly available
data including from car manufacturer associations.
o The level of employment will be monitored on the basis of publicly available
Eurostat statistics on sectoral employment data for the EU.
The methodology for an evaluation of the legislation will put particular emphasis in
ensuring that causality between the observed outcomes, based on the above indicators,
and the legislation can be established. In this context, methodological elements will
include the establishment of a robust baseline/counterfactual scenario and the use of
regression analysis/empirical research.
8.2 Operational objectives
Based on the policy options, the following operational objectives have been identified:
Operational objectives Indicators
Reach a specific CO2 emissions target level
by the target year(s)
Compliance of manufacturers with their
specific emissions target in the target
year(s)
Achieve a certain level of deployment of
zero/low emission vehicles in a specific year
Share of zero/low emission vehicles in
that year
Achieve actual CO2 emissions reductions
without an increase in the "emissions gap"
Divergence between real-world emissions
and type-approved/reported CO2
emissions data
169
Deviation between in-service conformity
results and type-approved/reported CO2
emissions data